SEC proposes crypto custody rules for investment advisers and regulated funds

The Securities and Exchange Commission proposed rules and amendments governing the custody of crypto assets by registered investment advisers and regulated funds. The regulated funds covered are registered investment companies and business development companies. The proposed changes fall under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. The SEC said the proposal would remove regulatory barriers to crypto-related investment advice and allow regulated funds to offer a wider range of crypto asset-related investment strategies. The proposal would update financial statement audit requirements for registered investment advisers and broker-dealer custody requirements for regulated funds. It would permit self-custody of crypto assets under certain circumstances. It would also allow state trust companies to serve as custodians for clients' and regulated funds' crypto assets. SEC Chairman Paul S. Atkins said the crypto asset market has become a multi-trillion-dollar asset class since Bitcoin's introduction in 2008. Atkins said the proposal would give advisers and funds a compliant custody pathway where none previously existed. The public comment period will remain open for 60 days after the SEC's proposing release is published in the Federal Register.