SEC proposes limited self-custody of client and fund crypto by advisers

The Securities and Exchange Commission proposed a framework on Thursday for investment advisers and regulated funds to hold crypto assets. The proposal aims to provide a compliant way to hold digital assets under rules that largely predate the internet. It would address cases where qualified custodial infrastructure for some crypto assets may not yet exist. The proposal would allow advisers to act as custodians for client and regulated fund crypto assets under limited circumstances, including when they determine that no permitted custodian is available. It would also allow state trust companies to serve as custodians for those assets. SEC Commissioner Hester Peirce clarified that adviser self-custody means advisers acting as custodians for client assets, not investors directly controlling their own crypto. Peirce said regulators should protect investors' right to hold their own assets rather than force them to use someone else as custodian. SEC Chair Paul Atkins said crypto had grown into a multi-trillion-dollar asset class since Bitcoin emerged in 2008, while regulations had not kept pace. The public comment period will remain open for 60 days. Atkins said more regulatory proposals were coming and that he wanted to help President Trump make the United States the world's crypto capital. The SEC and Commodity Futures Trading Commission have accelerated crypto regulation efforts after the Clarity Act failed to pass the Senate. In the following days, the SEC released its innovation exemption, and the CFTC filed crypto asset rulemaking with the White House. NovaDius President Nate Geraci said some politicians would wish they had passed the Clarity Act.