US SEC Proposes New Rules for Crypto Asset Custody

The US Securities and Exchange Commission (SEC) issued a proposal to establish a specialized framework for crypto asset custody, based on the Investment Advisers Act of 1940 and the Investment Company Act of 1940.

The proposal covers registered investment advisers and regulated funds, updating the custody and audit requirements applied to them when holding digital assets for their clients.

SEC Chairman Paul Atkins stated that existing rules "have not kept pace" with developments in crypto assets, while the public comment period begins 60 days after the proposal is published in the Federal Register.

This proposal concerns investors and financial institutions dealing in crypto assets, as custody rules dictate how client assets are safeguarded and who holds responsibility for their loss, an issue affecting the security of funds and investor confidence in the digital market.

What do these terms mean?

Crypto assets: Digital currencies and assets relying on blockchain technology, registered and transferred electronically without a central intermediary such as a bank.

Custody: The holding and securing of a client's assets by a responsible third party, with rules defining who holds this responsibility and insurance standards.

Registered Investment Adviser: A company or person licensed by the Commission to manage clients' money and provide investment advice for a fee.

Federal Register: The official journal of the US government where proposed laws and regulations are published, and its publication opens the public comment period.