The Securities and Exchange Commission on Oct. 1 proposed a new framework for how registered investment advisers and regulated funds can custody crypto assets under federal securities laws.
A tailored custody framework
The proposal covers registered investment advisers along with regulated funds, a group that includes registered investment companies and business development companies.
According to the SEC, the changes would modernize its custody rules and remove regulatory barriers that have held back advisers from giving crypto-related investment advice.
They would also let regulated funds offer clients access to a wider range of crypto asset-related investment strategies.
Atkins says the rules fell behind
SEC Chairman Paul S. Atkins noted that since bitcoin’s arrival in 2008, the year the bitcoin whitepaper was published, crypto has grown from a niche curiosity into a multi-trillion-dollar asset class that investors actively want exposure to.
He said in a statement:
“Unfortunately, our rules and regulations have not kept pace. To that end, today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before—and replacing the grey of uncertainty created by custody rules crafted for a bygone era.”
Self-custody and state trust companies
The proposed rules and amendments fall under the Investment Advisers Act of 1940 and the Investment Company Act of 1940.
Among other updates, they would revise requirements covering financial statement audits for registered investment advisers and broker-dealer custodial services for regulated funds.
The proposal would also permit crypto assets to be held in self-custody under certain circumstances, while allowing state trust companies to act as custodians for client and regulated fund crypto assets.
Comment period
The public comment period will stay open for 60 days after the SEC’s proposing release is published in the Federal Register.
