SEC Allows Limited Crypto Self-Custody Under Proposed…

AI summary of the source article

The U.S. Securities and Exchange Commission has proposed an updated framework enabling investment advisers and regulated funds to hold crypto assets through expanded custody avenues. Under the proposal, institutions can utilize state trust companies as custodians and engage in limited adviser self-custody if no permitted custodian is available. Commissioner Hester Peirce clarified that adviser self-custody involves advisers holding client assets, rather than individual investors holding their own private keys. The proposal enters a 60-day public comment period as regulators establish digital asset guidelines amid stalled congressional legislation. Institutions adopting direct custody must still meet cybersecurity, valuation, and audit standards.

Why it matters

The framework could lower barriers that prevent traditional asset managers from holding digital assets directly rather than relying exclusively on exchange-traded products and third-party investment vehicles.

Key facts

• The SEC proposal permits advisers to custody crypto assets themselves in limited circumstances, including when no permitted custodian is available.
• Adviser self-custody refers to advisers acting as custodians for client assets, not individual investors controlling their own private keys.
• The proposed custody framework will undergo a 60-day public comment period.