SEC Proposes Crypto Custody Framework for Funds
The SEC has proposed a crypto custody framework for registered investment advisers, investment companies and business development companies. The proposal would allow conditional self-custody when no permitted custodian supports a specific digital asset. Advisers would have to document the decision and reassess it quarterly.
The crypto custody framework would also allow state trust companies to hold digital assets, subject to verification of their legal authority and written safeguards against theft, loss, misuse and misappropriation. These safeguards would require annual reviews. The SEC said existing Investment Advisers Act and Investment Company Act rules were designed for traditional assets and have not kept pace with crypto markets.
The proposal also includes updated recordkeeping requirements and is intended to reduce custody barriers to crypto investment advice and fund strategies. It is not final. A 60-day public comment period will begin after publication in the Federal Register. The plan follows the SEC’s broader Regulation Crypto Assets proposal, while wider legislation known as the Clarity Act remains stalled.
For crypto traders, the immediate price impact is likely limited because implementation remains uncertain. Over the longer term, clearer crypto custody rules could support institutional participation and on-chain markets in the United States. Traders should monitor Federal Register publication, SEC proposals and industry responses.
Neutral
The proposal does not immediately change trading access, asset demand or compliance obligations because it is not final and still requires a 60-day public comment period. Crypto prices may therefore see limited direct reaction, although traders could briefly respond to headlines about easier institutional custody.
Over the longer term, conditional self-custody and access to state trust companies could remove operational barriers for investment advisers and funds. That may improve institutional participation, liquidity and confidence in US digital-asset markets. However, implementation could change after public feedback, and the proposal does not guarantee approval of specific crypto products or broader market legislation. Historical reactions to regulatory proposals are often muted until rules are finalised, making a neutral classification most appropriate.