SEC Proposes Overhaul of Crypto Custody Rules for Investment Advisers and Funds

The US Securities and Exchange Commission proposed new rules and statutory amendments on Oct. 1 to establish a dedicated crypto custody framework for registered investment advisers and regulated funds ¹. The initiative updates mandates under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 to remove regulatory barriers limiting investment advisers from offering crypto-related advice ¹. Regulated funds, including registered investment companies and business development companies, would also gain expanded flexibility to provide clients with crypto-related strategies ¹. At the time of writing, digital asset markets held steady, with $BTC trading at $84,640 and $ETH at $2,700.

Under the Commission's proposal, registered entities would be authorized to use state trust companies as custodians for client and regulated fund crypto assets ¹. The provisions also permit entities to hold crypto assets in self-custody under specific conditions ¹. Furthermore, the SEC's draft package revises rules concerning broker-dealer custodial services for funds and updates financial statement audit obligations that apply to registered investment advisers ¹.

SEC Chairman Paul S. Atkins stated that while the digital asset market has matured into a multi-trillion-dollar asset class since Bitcoin's creation in 2008, regulatory standards had previously failed to keep pace ¹. Atkins noted that the rulemaking is designed to provide a compliant operational path to replace regulatory uncertainty ¹. This development ties into wider agency oversight covered in Basis Desk's review of US crypto regulation and ongoing regulatory coordination, including the SEC and CFTC Joint Interpretation on Crypto Securities Laws.

The SEC confirmed that the public comment window will stay open for 60 days following the publication of the proposing release in the Federal Register ¹.