SEC Proposes Letting Advisers and Funds Hold Client Crypto When No Custodian Can

AI summary of the source article

The Securities and Exchange Commission has proposed rules allowing registered investment advisers and regulated funds to hold client crypto assets directly when no approved custodian is available. Under the proposal, advisers holding crypto must verify quarterly that no custodian is available, maintain private key controls requiring at least two approvers, establish separate client addresses, and obtain outside accountant control reports. The plan also allows eligible state trust companies to serve as permitted custodians if they meet safeguarding and segregation standards. SEC Chairman Paul Atkins stated the measure addresses an asset custody gap, and the 760-page proposal will undergo a 60-day public comment period.

Why it matters

According to SEC Chairman Paul Atkins, the proposal aims to close a regulatory gap for advisers seeking lawful custody of client-demanded crypto assets. Commissioner Hester Peirce stated that permitting state trust companies to serve as custodians would increase competition and expand investor protection.

Key facts

• The SEC proposed letting advisers and funds self-custody client crypto if no approved custodian is available, subject to quarterly rechecks and multi-person key approvals.
• The rules would allow eligible state trust companies to custody crypto if they have state authorization and segregated client asset policies.
• The 760-page proposal will be open for public comment for 60 days after publication in the Federal Register.