SEC Chairman Paul Atkins said a proposed framework for crypto custody would give investment advisers and funds “a compliant pathway where none existed before.” The Securities and Exchange Commission put forward the rules on Thursday for registered investment advisers and regulated funds holding crypto assets for clients.
The proposal would revise custody requirements under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. It would also change financial statement audit requirements for registered investment advisers and rules on broker-dealer custodial services for regulated funds.
Under the proposal, advisers and funds could use self-custody in limited situations. State trust companies could also act as custodians for client and fund holdings.
Atkins said existing rules had not kept pace with the growth of digital assets. The SEC said its plan is intended to remove an obstacle for advisers that have been unable to offer crypto-related services and to widen the crypto strategies regulated funds can offer investors.
The proposal follows Congress’s failure to advance the Digital Asset Market Clarity Act, which would have divided oversight of crypto markets between the Commodity Futures Trading Commission and the SEC.
The Senate stopped the bill in a 50-to-49 procedural vote, with every Democrat and four Republicans voting against it. A central point of dispute was an ethics provision that Democrats considered too weak to stop presidents and senior officials profiting from crypto ventures.
Regulators have instead turned to powers they already hold to address separate parts of the market. Within days of the Senate vote, the CFTC sent a crypto rulemaking proposal to the White House.
On Monday, the CFTC published an Advanced Notice of Proposed Rulemaking that would require federal registration for crypto exchanges offering leveraged, margined or financed trading to retail customers. Platforms handling basic spot crypto transactions would not have to register with the agency and could fall under state oversight instead.
Interested parties will have 60 days to comment once the SEC proposal is published in the Federal Register.
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