SEC proposes crypto custody rules for investment advisers and regulated funds
Serguey Asael Shinder2 min readThe US Securities and Exchange Commission has proposed new rules and amendments setting out how registered investment advisers and regulated funds, meaning registered investment companies and business development companies, can hold crypto assets. The proposal was announced on 1 October.
According to the Commission, the changes would modernise custody rules and remove regulatory barriers that keep advisers from giving crypto-related investment advice, and would let regulated funds offer a wider range of crypto investment strategies. Among the specific points in the announcement, the proposal would permit crypto assets to be held in self-custody under certain circumstances and allow state trust companies to act as custodians for client and fund crypto assets.
The amendments under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 also cover other areas, including financial statement audits for registered investment advisers and broker-dealer custodial services for regulated funds. The SEC has published a fact sheet and the full proposing release alongside the announcement.
Chairman Paul Atkins said the crypto market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure, while the rules have not kept pace, and that the proposal would give advisers and funds "a compliant pathway where none existed before", replacing uncertainty created by custody rules written for a bygone era.
The public comment period will stay open for 60 days after the proposing release is published in the Federal Register. Until rules are adopted, nothing in the proposal changes what advisers and funds may do.
Why it matters
Custody is where most institutional money stops: an adviser who cannot hold an asset in a compliant way cannot recommend it at scale. The self-custody and state trust company provisions are the parts to watch in the comment period, since they decide who can hold the keys, and how far outside the bank-custodian model the rule goes.