SEC Unveils Proposed Rules for Crypto Custody by Investment Advisers and Registered Funds

Oct. 2 (UTC+8) — The U.S. Securities and Exchange Commission has proposed a new regulatory framework governing how investment advisers and regulated funds custody crypto assets, aiming to create a "compliance pathway" for holding digital assets under rules largely written before the internet era. SEC Chair Paul Atkins said the market has expanded dramatically since Bitcoin's 2008 launch, evolving from a niche product into a multitrillion-dollar asset class as investors seek exposure, while regulations have not kept pace. The proposal targets a key institutional constraint: limited availability of qualified custody infrastructure for certain crypto assets. It would allow self-custody in specific circumstances and permit state-chartered trust companies to provide custody services for clients' and regulated funds' crypto assets. The SEC said the changes are particularly relevant for institutions such as asset managers and hedge funds that want to hold Bitcoin and other crypto assets directly instead of accessing them through ETFs or other intermediaries. Under the proposal, advisers could also act in a "self-custody" capacity for clients' and regulated funds' crypto assets under limited conditions, including when the adviser determines that no qualified custodian is available. SEC Commissioner Hester Peirce noted that "self-custody" in this context means the investment adviser serving as the custodian of client assets, not investors personally controlling their own crypto holdings. (Source: BlockBeats)