SEC Proposes New Crypto Asset Custody Rules for Advisers and Funds
The SEC unveiled a proposed framework governing how registered investment advisers and regulated funds must custody crypto assets under federal securities law.
The Securities and Exchange Commission has put forward proposed rules and amendments designed to establish a tailored custody framework for crypto assets held by registered investment advisers and regulated funds, including registered investment companies and business development companies.
The proposal represents a significant regulatory step as the SEC attempts to bring the fast-growing digital asset sector under the established guardrails of federal securities law. By targeting the custody function specifically, the agency is focusing on one of the most operationally complex challenges facing institutional participants in the crypto market — namely, how to securely hold client assets in a manner consistent with existing investor-protection standards.
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Registered investment advisers are already subject to the SEC's existing Custody Rule under the Investment Advisers Act, which mandates that client assets be held with a qualified custodian. The new proposal appears aimed at clarifying how those requirements translate to the unique technical and legal characteristics of crypto assets, which do not fit neatly into the frameworks built for traditional securities or cash equivalents.
For regulated funds, the implications are similarly broad. Investment companies face strict requirements around asset safekeeping, and any formal SEC framework would shape how fund managers structure their digital asset operations, select custodial partners, and disclose risks to investors. The proposal could also influence which third-party entities qualify to serve as custodians for these purposes.
The rulemaking reflects ongoing SEC efforts to assert jurisdiction over the crypto industry and bring greater transparency and accountability to a sector that has faced repeated high-profile custody failures. Public comment periods typically follow such proposals before any final rules are adopted. Continue reading at Press Releases.
