SEC Chairman Paul Atkins has asked the agency's staff to develop a regulatory proposal that would permit investment advisers to directly custody crypto assets for clients under certain conditions. The initiative, disclosed on September 14 at the Solana Policy Institute Summit, forms one component of the SEC's emerging crypto regulatory framework.
Under the proposal, state trust companies could also qualify to hold crypto assets as custodians. Atkins emphasized that self-custody rules are needed because qualified third-party custodians do not yet exist for many digital assets. The plan would resolve a longstanding regulatory question about which institutions can hold digital assets for registered advisers and investment funds.
Three-Pillar Regulatory Framework
The custody initiative operates alongside two other major components. The SEC proposed Regulation Crypto Assets on August 18 to establish an offering regime for certain investment contracts involving crypto assets. That proposal includes exemptions permitting offerings of up to $5 million over four years or as much as $75 million during each 12-month period, subject to disclosure and other requirements. It also contains a conditional safe harbor from classification as an investment contract.
Transfer-agent modernization represents the third pillar, with the SEC proposing to revise rules that have not been substantively updated since the late 1970s and early 1980s. The modernization would address electronic communications, recordkeeping, blockchain technology, securities offerings, and share transfers.
Congressional Action Stalls
Atkins urged Congress to advance the CLARITY Act to address questions surrounding when investment contracts involving crypto assets cease to exist. However, the Senate failed to advance the bill on September 15 after a cloture motion fell short of the required 60 votes, with the procedural vote ending 49-50. The failed vote followed unresolved disputes over ethics provisions, stablecoin-related issues, and other regulatory safeguards.
Atkins indicated that the SEC intends to continue its regulatory program regardless of the legislation's outcome, positioning agency rulemaking and congressional market-structure legislation as separate regulatory tracks.
