The U.S. Securities and Exchange Commission (SEC) proposed a new approach to cryptocurrency custody for registered investment advisors and regulated funds on Wednesday. This move aims to eliminate years of uncertainty regarding the custody structure of digital assets. The proposed rules will allow investment advisors to self-custody cryptocurrency under certain conditions and will also permit state-chartered trust companies to act as custodians for client assets and funds. Additionally, the rules governing the audit of financial statements and custodial services for brokers will be updated.
The initiative aims to expand investor access to crypto strategies by removing barriers that have kept investment advisors from providing such services. SEC Chair Gary Gensler noted that since the emergence of Bitcoin in 2008, the cryptocurrency market has transformed from a niche hobby into a multi-trillion-dollar asset class that investors are actively seeking access to. He added that "the rules have not kept pace with the market's evolution" and that the proposed changes will help eliminate the "gray area of uncertainty" created by custody standards designed for a bygone era.
This plan is part of a broader regulatory strategy by the SEC following the failure of the Clarity Act in the Senate. The regulator has also implemented a new innovation rule that allows tokenized stocks to trade on-chain, offering a new framework for crypto fundraising called the Crypto Asset Regulation. The proposal is not final. A 60-day public comment period will open after its publication in the Federal Register, during which the SEC may make changes to the rules before voting on their approval.
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