- The SEC proposed easing custodian rules for investment advisers to hold client crypto assets.
- Advisers can self-custody assets if no eligible custodian is available, with strict quarterly reviews.
- State trust companies would be allowed to serve as qualified crypto custodians under the proposal.
The US Securities and Exchange Commission (SEC) proposed on Thursday to ease rules for how investment advisers and funds hold cryptocurrency. Chair Paul Atkins said the crypto market has grown into a multi-trillion-dollar asset class but rules have not kept pace.
The proposal addresses a practical barrier: advisers often struggle to find a qualified custodian for specific tokens. The Digital Chamber previously noted that some advisers declined token allocations or asked portfolio companies to retain assets until custody became available.
Under the proposal, advisers can hold clients’ crypto themselves if no eligible custodian is available. Advisers must reassess availability quarterly and transfer assets to a custodian as soon as reasonably possible.
Self-custody requires Cybersecurity safeguards, private key protection, and separation of client holdings. At least two authorized individuals must approve any transfer of a self-custodied crypto asset.
Commissioner Hester Peirce likened the uncertainty to a regulatory “roller coaster,” saying advisers have been “gritting their teeth and holding on for dear life.” Commissioner Mark Uyeda noted the proposal recognizes an inherent conflict of interest, with fiduciary duties continuing to apply.
State trust companies authorized by a US state can serve as crypto custodians. They must have audited financial statements, segregate client holdings, and demonstrate reasonable procedures to prevent loss or theft.
The package also proposes changes to audit, recordkeeping, and disclosure requirements. The SEC will accept public comments for 60 days after publication in the Federal Register.
The proposal follows the failed CLARITY Act in the Senate last month. The CFTC has submitted a crypto-market proposal for White House review while the SEC has opened a path for trading tokenized stocks.
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