In brief:
₿- The new rules would allow certain crypto assets to be held in self-custody and enable state-chartered trust companies to serve as custodians for clients and regulated funds.
₿- A 60-day public comment period will begin after the proposal is published in the Federal Register, before the SEC considers further action.
The U.S. Securities and Exchange Commission (SEC) has proposed new rules aimed at establishing a dedicated framework for how registered investment advisers and regulated funds can hold and safeguard crypto assets under federal securities laws.
The proposal would update custody requirements under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, with the SEC arguing that existing rules were developed before crypto assets became a significant investment market. The changes would apply to registered investment advisers as well as regulated funds, including registered investment companies and business development companies.
New rules would expand crypto custody options
A central element of the proposal is to give investment advisers and funds greater flexibility in selecting how crypto assets are held. Under certain conditions, the rules would allow crypto assets to be placed in self-custody and would permit state-chartered trust companies to act as custodians for crypto assets belonging to advisory clients and regulated funds.
The SEC also proposes changes affecting broker-dealer custody arrangements and financial statement audit requirements for registered investment advisers. Together, the measures are intended to bring custody requirements closer to the way crypto-related investment services operate while maintaining safeguards for investors.
For investment advisers, the proposed framework could provide a clearer route for offering crypto-related investment advice without having to navigate custody requirements designed primarily around traditional financial assets. For regulated funds, the changes could broaden the range of crypto asset-related investment strategies that can be offered within the existing securities regulatory framework.
SEC Chairman Paul Atkins said the proposal responds to the rapid expansion of the crypto asset market and aims to replace uncertainty around how existing custody requirements apply to digital assets with a more defined regulatory approach.
The proposal does not immediately change the rules. The SEC will first seek public feedback, with the comment period remaining open for 60 days after the proposing release is published in the Federal Register.
Why does it matter?
Custody has been one of the practical issues affecting how regulated financial institutions can participate in crypto markets, particularly where existing securities rules do not map neatly onto digital assets. By addressing who can hold crypto assets and under what conditions, the proposal could help define the operational infrastructure available to advisers and funds seeking regulated exposure to the sector. Its treatment of self-custody and state trust companies is also likely to be relevant to the wider debate over how traditional financial regulation should accommodate crypto-native custody models.
Disclaimer: The content of this article is for informational purposes only and does not constitute financial, investment, or trading advice. Readers should conduct their own research and consult a qualified cryptocurrency advisor before making any investment decisions.
Stay informed,
Rodcas Consulting Group