SEC Proposes New Rules for Crypto Custody

The U.S. Securities and Exchange Commission has proposed new rules for investment advisers and regulated funds regarding asset custody, focusing on cryptocurrency. The proposal allows advisers and funds to hold client crypto directly if no permitted custodian is available. This move comes despite lawmakers blocking the Clarity Act last month, which aimed to clarify the classification of digital assets. SEC Chairman Paul S. Atkins emphasized the need for updated regulations, stating that the crypto market has evolved into a multi-trillion-dollar asset class since Bitcoin's inception in 2008. The proposed rules would establish a regulatory framework for crypto custody, allowing records on a blockchain to count toward compliance under certain conditions. Additionally, state trust companies could serve as custodians for client and regulated fund crypto assets, also subject to conditions. The SEC had previously indicated that it would proceed with regulating the crypto industry regardless of the Clarity Act's outcome.

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