Key Takeaways
- • The SEC has proposed a tailored custody framework under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, covering registered investment advisers and regulated funds, including registered investment companies and business development companies.
- • The proposal permits crypto assets to be held in self-custody under certain circumstances and allows state trust companies to act as custodians for both client and fund assets.
- • The package updates custody requirements to reflect current industry practice, including financial statement audits for registered investment advisers and broker-dealer custodial services for regulated funds.
- • SEC Chairman Paul S. Atkins described the proposal as a clear pathway where none previously existed, replacing uncertainty created by safekeeping rules written for an earlier era.
- • Public comment will be accepted for 60 days following publication of the proposed release in the Federal Register.
Summary
The U.S. Securities and Exchange Commission has proposed rules that would give registered investment advisers and regulated funds a compliant route to safeguarding digital assets. The package sets out a custody framework under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, with regulated funds defined to include registered investment companies and business development companies. According to The Paypers, the regulator's stated aim is to remove barriers that currently restrict crypto-related advice, modernise custody requirements and widen investor choice.
Under the proposal, funds could also offer clients a broader range of strategies linked to crypto assets. The SEC is also updating several custody requirements to better reflect current industry practices, including financial statement audits for registered investment advisers and the use of broker-dealer custodial services for regulated funds. In certain circumstances, crypto holdings could remain in self-custody, and state trust companies could serve as custodians for both client and fund assets. Together, the measures are intended to clarify where and how crypto assets can be held in compliance with federal securities laws.
In a statement accompanying the release, SEC Chairman Paul S. Atkins noted that the crypto market has grown from a niche interest after Bitcoin's emergence in 2008 into an asset class valued in the trillions of U.S. dollars, with investors actively seeking exposure. He said existing regulations had not kept pace and characterized the proposal as a clear pathway where none previously existed. For advisers, the absence of a dedicated regime has meant operating under requirements not designed with digital holdings in mind.
Public feedback will be accepted for 60 days following publication of the proposed release in the Federal Register.
Under the proposal, funds could also offer clients a broader range of strategies linked to crypto assets. The SEC is also updating several custody requirements to better reflect current industry practices, including financial statement audits for registered investment advisers and the use of broker-dealer custodial services for regulated funds. In certain circumstances, crypto holdings could remain in self-custody, and state trust companies could serve as custodians for both client and fund assets. Together, the measures are intended to clarify where and how crypto assets can be held in compliance with federal securities laws.
In a statement accompanying the release, SEC Chairman Paul S. Atkins noted that the crypto market has grown from a niche interest after Bitcoin's emergence in 2008 into an asset class valued in the trillions of U.S. dollars, with investors actively seeking exposure. He said existing regulations had not kept pace and characterized the proposal as a clear pathway where none previously existed. For advisers, the absence of a dedicated regime has meant operating under requirements not designed with digital holdings in mind.
Public feedback will be accepted for 60 days following publication of the proposed release in the Federal Register.
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