SEC Proposes New Custody Rules for Crypto Assets at Investment Firms
The SEC has unveiled proposed rules creating a tailored framework for how registered investment advisers and funds must custody crypto assets.
The Securities and Exchange Commission has put forward new rules and amendments designed to establish a specific regulatory framework governing how registered investment advisers and regulated funds — including registered investment companies and business development companies — may hold and safeguard crypto assets under federal securities laws.
The proposal signals a significant regulatory step by the SEC to bring digital asset custody practices in line with the standards already applied to traditional securities holdings. Investment advisers managing client crypto positions have long operated in a gray area, with existing custody rules written well before digital assets became a mainstream financial product.
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By tailoring the framework specifically to crypto, the SEC is acknowledging the distinct technical and operational challenges that digital assets present compared to conventional securities, such as the use of private keys, blockchain-based settlement, and the absence of centralized depositories. The proposal would apply to both adviser-managed accounts and regulated fund structures, potentially affecting a broad swath of the asset management industry.
The rulemaking reflects ongoing SEC efforts to assert jurisdiction over the crypto sector and impose investor-protection guardrails that the agency argues are long overdue. Industry participants and legal observers are expected to scrutinize the proposal closely, particularly around which types of entities would qualify as compliant custodians under the new standards.
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