SEC Pushes Crypto Custody Rules for Advisers and Funds
SEC proposes new crypto custody rules for investment advisers and funds
The U.S. Securities and Exchange Commission has proposed new rules and amendments aimed at modernizing how registered investment advisers and regulated funds hold crypto assets in custody on behalf of clients. The SEC said the package is designed to create a tailored framework for digital assets, updating custody requirements that were originally built for traditional securities and do not fully address crypto market practices.
The proposal would apply to registered investment advisers as well as regulated funds, including registered investment companies and business development companies, under the Investment Advisers Act of 1940 and the Investment Company Act of 1940.
Among the most notable changes, the SEC said it would allow advisers and funds to custody crypto assets through self-custody arrangements in limited situations, provided certain conditions are met. The proposal would also permit the use of state-registered trust companies as custodians, subject to requirements outlined by the SEC.
The Commission also signaled broader updates to related compliance obligations. The proposal includes changes affecting:
- Financial statement audit requirements for registered investment advisers
- How regulated funds may custody assets through broker-dealers
- Recordkeeping standards
- Disclosure requirements
The SEC framed the effort as a way to strengthen investor protection while also expanding the set of custody options available to advisers and funds. It also described the changes as removing regulatory barriers that can limit an adviser’s ability to provide crypto-related investment advice and potentially restricting the range of crypto-asset investment strategies that regulated funds can offer.
Public comments on the proposal are open for 60 days, according to coverage of the announcement.
The proposal arrives as the SEC continues to adjust how existing regulatory frameworks apply to digital assets. A snippet tied to the announcement also noted the custody proposal as a “swan song” for Commissioner Hester Peirce, described as the inaugural head of the SEC’s Crypto Task Force, who is expected to depart this week.
