The U.S. Securities and Exchange Commission has proposed new rules governing how investment advisers and regulated funds may hold cryptocurrency assets on behalf of clients.
Under the proposal, advisers and funds would be permitted to hold client crypto directly, but only when no permitted custodian is available. The SEC also said it would allow state trust companies to serve as custodians for client and regulated fund crypto assets, subject to conditions.
The regulator indicated that records maintained on a blockchain could count toward compliance requirements, subject to specified conditions.
Regulatory Framework in the Absence of Legislation
The proposal comes after lawmakers blocked the Clarity Act, comprehensive legislation intended to distinguish between digital assets classified as securities, commodities, or payment stablecoins.
SEC Chairman Paul S. Atkins stated in the announcement: "Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace."
Atkins added that the proposed rules 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."
The SEC had previously indicated that it would proceed with cryptocurrency industry regulation regardless of whether the Clarity Act advanced through Congress.
