The US Securities and Exchange Commission has proposed a new framework that would make it easier for investment advisers and regulated funds to hold cryptocurrencies for their clients, addressing years of uncertainty over which institutions are legally allowed to safeguard digital assets.
The rules (proposed on October 1) are not yet in force. They will undergo a public comment period lasting 60 days after publication in the Federal Register. Today, professional investment managers generally have to keep client assets with approved custodians such as banks or broker-dealers. Crypto creates a problem because some digital assets require specialized systems for protecting private keys, while suitable traditional custodians are not always available. The SEC’s proposal creates two important new options.
First, an investment adviser or regulated fund could, under limited circumstances, custody crypto assets itself rather than placing them with an outside institution. This “self-custody” does not mean individual investors holding coins in their own wallets. It means the investment firm itself protecting crypto on behalf of clients. It would generally be permitted only when the adviser determines that no suitable external custodian is available, with that conclusion reviewed quarterly.
Second, state-chartered trust companies could formally serve as crypto custodians if advisers verify that they are authorized and maintain appropriate safeguards against theft, loss and misuse, including cybersecurity and private-key protections.
For ordinary investors, the main consequence could be wider access to crypto through professionally managed funds and investment advisers rather than directly through exchanges or personal wallets. SEC Chair Paul Atkins says the objective is to remove regulatory barriers while bringing crypto custody under clearer investor-protection rules. The proposal is nevertheless controversial. Critics argue that some state trust companies receive less intensive oversight than federally regulated banks, potentially creating weaker protections if a custodian fails or assets are stolen.