In a significant move aimed at modernizing the federal oversight of digital assets, the U.S. Securities and Exchange Commission (SEC) on Thursday proposed a comprehensive new regulatory framework governing how investment advisers and funds must handle and safeguard customer crypto assets. The 760-page proposal represents a fundamental shift in the agency’s approach, seeking to replace decades-old regulations with a structure specifically tailored to the unique technical and operational requirements of the blockchain era.
The proposal arrived as a cornerstone of the agency’s current agenda, serving as a legislative "swan song" for Commissioner Hester Peirce. Peirce, who has served as the inaugural chief of the SEC’s Crypto Task Force and has long been a vocal advocate for regulatory clarity in the digital asset space, is slated to exit the agency this Friday. Her departure marks the end of an era for the commission’s internal crypto policy development and comes at a time when the agency is moving rapidly to finalize a pro-crypto securities agenda.
SEC Chairman Paul Atkins, in a statement accompanying the release of the proposal, framed the move as a necessary evolution of the agency’s protective mandate. He noted that while the primary goal of the SEC has always been to protect advisory clients and regulated funds from the loss, theft, or misuse of their assets, the existing rulebook was increasingly ill-equipped to handle the realities of the 21st-century financial landscape.
"The U.S. Securities and Exchange Commission is aiming to clarify how investment firms can handle and keep customer crypto assets in a new rule proposed Thursday," Atkins stated. "This proposal 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."
A New Standard for Digital Asset Safekeeping
The proposed rules seek to resolve years of ambiguity regarding which entities are legally permitted to hold crypto assets on behalf of institutional investors. Under the current regime, many investment advisers have struggled to find "qualified custodians" that meet the SEC’s traditional standards, often leading to a fragmented market where firms operated in a state of regulatory limbo.
The SEC’s new approach clarifies the specific categories of companies that can serve as proper custodians for crypto assets. Crucially, the proposal would formally permit the use of state-chartered trusts as custodians. This inclusion is a major development for the industry, as many of the most prominent crypto-native custody providers operate under state trust charters rather than national bank charters. By explicitly recognizing these entities, the SEC is opening a clear door for regulated funds to engage with established crypto infrastructure providers.
Beyond defining who can hold the assets, the proposal introduces rigorous new requirements for record-keeping and federal disclosures. Investment advisers would be required to maintain detailed logs of digital asset transactions and provide regular reports to the SEC, ensuring a level of transparency comparable to that of traditional equity and bond markets. The rules also introduce specific auditing requirements, designed to verify that the assets claimed by a fund actually exist on the blockchain and are under the exclusive control of the designated custodian.
The "Self-Custody" Exception for Advisers
