The SEC has proposed new regulations for managing cryptocurrency custody by investment firms, allowing self-custody under certain conditions.
The U.S. Securities and Exchange Commission (SEC) has unveiled a new proposal aimed at establishing clearer custody regulations for cryptocurrency assets managed by investment firms. This initiative is a significant step in the SEC's broader strategy to regulate digital assets.
SEC Chairman Paul Atkins stated that the proposed rules are designed to create a regulatory framework for the custody of crypto assets, offering a compliant path for investment advisers and funds that previously lacked guidance. The rules will clarify which entities are authorized to hold crypto assets and will set forth record-keeping and disclosure requirements for investment advisers and regulated funds.
One notable aspect of the proposal is the allowance for self-custody by investment advisers, which is defined specifically for asset management firms. Advisers must demonstrate their capability in managing crypto assets and can only pursue self-custody if a qualified custodian is unavailable.
The proposal also introduces security measures that require advisers to conduct quarterly evaluations. These regulations are particularly pertinent for newly launched tokens that lack custodian support. Atkins emphasized that existing custody regulations, which were tailored for traditional assets, are inadequate in the evolving digital landscape.
The proposed custody rules are now open for a 60-day public comment period and will permit self-custody under specific conditions, while allowing state-chartered trusts to serve as custodians.
This regulatory move coincides with the departure of Commissioner Hester Peirce, who has played a pivotal role in the SEC's Crypto Task Force. Her exit leaves the commission with only two active members. Recently, the SEC adjusted its quorum requirements, reducing the number of commissioners needed for decisions from three to two, enabling more streamlined decision-making.
With the introduction of these custody regulations, the SEC has addressed key components of its initial crypto agenda outlined by Chairman Atkins. This comes alongside other recent initiatives, including the "Innovation Exemption" for tokenizing securities and proposed guidelines for firms raising funds through digital assets, reinforcing the SEC's commitment to a pro-crypto regulatory environment.
