CoinDesk
The SEC has sent a new crypto-custody rule concept to the White House Office of Management and Budget for review, the first step toward a formal proposal for investment advisers. The effort follows the agency's 2023 attempt under Gary Gensler, which never won final approval and was later pulled. The SEC says the new approach would modernize custody rules for adviser client and fund assets, address crypto, and remove outdated burdens.
Why it matters
The 2023 proposal would have required advisers to place client crypto with a narrow set of qualified custodians, generally chartered banks or trust companies, SEC-registered broker-dealers, or CFTC-regulated futures commission merchants. The Small Business Administration said the SEC had "drastically underestimated potential impacts," while a16z called the plan "illegal, infeasible, and dangerous."
Custody rules determine whether advisers can offer crypto exposure through institutions with a clear compliance route. Since the earlier effort, a surge in federal trust bank charters has expanded the pool of institutions able to handle these assets, and Chair Paul Atkins has made friendlier crypto regulation a priority.
Market impact
A clearer framework could reduce compliance uncertainty for investment advisers and make institutional crypto custody easier to arrange in the United States. The immediate signal is regulatory rather than a token-price catalyst: the concept remains under review, and no formal proposal has been issued.
The SEC's agenda suggests an October proposal, but its timelines have slipped before. A separate broker-dealer compliance proposal and the SEC's "Regulation Crypto Assets" proposal place custody inside a broader effort to define how traditional finance can handle digital assets.
Frequently asked questions
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What stage has the SEC's new crypto-custody effort reached?
The SEC has sent the concept to the White House Office of Management and Budget for review. A formal proposal would come later.
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What changes is the SEC considering for adviser custody rules?
The agency says it wants to modernize custody rules for adviser client and fund assets, including crypto, while removing outdated burdens.
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What did the SEC's 2023 custody proposal require?
It would have limited qualified custodians largely to chartered banks or trust companies, SEC-registered broker-dealers and CFTC-regulated futures commission merchants.
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Why did the SEC's 2023 custody proposal fail to become final?
The proposal faced objections from financial firms, crypto platforms, the SBA and a16z. It never won final approval under Gary Gensler and was later pulled.
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When might the SEC issue a formal custody proposal?
The SEC's agenda suggests October, but the agency's timelines have slipped before, so the date is not guaranteed.
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