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- The U.S. Securities and Exchange Commission proposed rules allowing registered investment advisers and regulated funds a framework to hold crypto assets.
- The October 1 proposal permits self-custody under specific conditions and allows state trust companies to serve as custodians.
- The proposal remains a rule and has not yet taken effect, with a 60-day public comment period open.
The U.S. Securities and Exchange Commission has proposed new rules that would give registered investment advisers and regulated funds a framework for holding crypto assets. The Oct. 1 proposal would permit self-custody in certain circumstances and allow state trust companies to serve as custodians for client and regulated fund crypto assets under specified conditions.
The proposal applies to registered investment advisers, registered investment companies and business development companies. It remains a proposed rule and has not taken effect.
Advisers Could Self-Custody Crypto
Under the proposal, an adviser could self-custody a client’s crypto asset when it determines that a permitted custodian is unavailable. That determination would have to be made before taking custody and reviewed quarterly afterward.
Advisers would also need documented crypto safeguarding expertise, private-key management controls and at least two-person authorization for transactions. Additional requirements would include cybersecurity controls, annual reviews, independent accountant reports and quarterly account statements.
Regulated funds could self-custody through their investment advisers under the framework. Fund boards would be required to oversee those arrangements and review the adviser’s determination that no permitted custodian is available.
State Trust Companies Could Hold Crypto
The proposal would also allow state trust companies to custody crypto assets for advisory clients and regulated funds under specified conditions. Advisers or funds would need to assess the company’s state authorization, safeguarding policies, audited financial statements and internal controls.
Client and fund crypto assets would have to remain segregated from the trust company’s own assets. The change is intended to clarify when state-chartered trust companies can qualify as permitted custodians.
SEC Also Proposes Broader Custody Changes
The proposal would update other adviser and fund custody requirements, including rules covering broker-dealer custodians, discretionary trading authority and audit provisions. It would also revise Form ADV, Form N-CEN and related recordkeeping requirements for crypto custody and tokenized fund shares.
SEC Chair Paul Atkins said the proposal is intended to provide advisers and funds with a clearer compliant pathway for custodying crypto assets under federal securities laws. The public comment period will remain open for 60 days after publication in the Federal Register.
