SEC moves to clear custody hurdle for advisers offering crypto
Custody requirements have kept some investment advisers from offering certain crypto to clients, a regulatory hurdle the SEC’s proposal could remove.
The US Securities and Exchange Commission (SEC) has proposed easing rules to allow investment advisers to hold digital assets directly when no qualified crypto custodian is available. This move aims to remove a regulatory hurdle that has limited advisers' ability to offer crypto investments to clients. SEC Chair Paul Atkins emphasized the need to catch up with the rapidly growing crypto market, which has reached multi-trillion-dollar levels.
The proposal would permit advisers to self-custody clients' crypto assets, subject to strict conditions such as ensuring no eligible custodian exists, quarterly reassessment, and quarterly transfer requirements if a custodian becomes available. Self-custody would also entail stringent safeguards around private keys, cybersecurity, and client holdings separation.
State trust companies could serve as custodians if they meet specific criteria, including authorization by the relevant state authority, robust asset protection measures, and audited financial statements. The SEC proposal will undergo a 60-day public comment period following publication in the Federal Register.
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