SEC Proposal Could Let Funds Hold Their Own Crypto Assets

The U.S. Securities and Exchange Commission (SEC) has proposed a new rule that would also allow investment advisers and regulated funds to custody crypto assets themselves under certain conditions.

According to CoinDesk, the proposal announced on October 1 aims to clarify how investment firms can hold clients’ crypto assets and which companies can provide custody services. The regulation also addresses recordkeeping, reporting to federal authorities, and audit requirements, in addition to the selection of custodians.

SEC Chair Paul Atkins said the current rules were designed for traditional assets and that investment advisers and funds need a clear framework suited to crypto. According to Atkins, the proposal will resolve uncertainty created by outdated custody rules.

Funds Could Custody Their Own Crypto Under Certain Conditions

The proposal allows self-custody under certain conditions, meaning crypto assets can be held without placing them with an external custodian. It also provides for the use of trust companies authorized to operate by states as crypto custodians.

These options will clarify the methods investment advisers and regulated funds can use to safeguard crypto assets. The proposal also includes further guidance on industry practices and audit requirements.

Proposal Will Be Open for Comment for 60 Days

The SEC is opening the proposal to a 60-day public comment period. The final form of the new custody framework will be determined after this review process.

Atkins emphasized that custody rules are intended to protect investment advisers’ clients and funds against risks such as loss, theft, misuse, and misappropriation of assets. The new proposal aims to adapt this protective approach to the custody of crypto assets.