TLDR
- The SEC has submitted a revised crypto custody framework for investment advisers to the White House for review.
- Chair Paul Atkins leads the initiative to establish clearer safeguard standards for digital assets.
- The framework aims to update custody requirements and provide guidance on protecting client crypto holdings.
- This initiative follows the withdrawal of a 2023 custody proposal during Gary Gensler’s tenure.
- The current SEC leadership has adopted a more accommodating stance toward digital asset regulation.
The U.S. Securities and Exchange Commission is advancing a revised framework governing how firms manage client holdings. This planned crypto custody rule seeks to establish clear guidelines for advisers and funds safeguarding digital assets within current custody frameworks.
The regulatory agency has forwarded the proposal to the White House Office of Management and Budget for evaluation. According to the SEC, this framework would bring custody regulations into the modern era, incorporate crypto assets, and eliminate outdated provisions that conflict with contemporary trading methods.
SEC Launches Second Crypto Custody Initiative
This latest initiative comes after the withdrawal of a 2023 framework proposed during former SEC Chair Gary Gensler‘s leadership. The previous version attempted to restrict advisers to using qualified custodians, specifically chartered banks, trust companies, registered broker-dealers, and regulated futures commission merchants.
The earlier framework faced significant pushback from financial institutions, digital asset companies, and government officials. The Small Business Administration’s legal team raised concerns that implementation expenses could jeopardize smaller advisory firms. Andreessen Horowitz contended that the framework presented both legal challenges and operational difficulties. The SEC subsequently abandoned the initiative.
Current SEC Chair Paul Atkins has prioritized establishing transparent crypto regulations as a core component of the agency’s mission. His regulatory philosophy emphasizes creating accessible pathways for market participants to issue, trade, and custody digital assets within the United States.
The regulatory landscape has evolved considerably since 2023. Additional crypto companies have obtained federal trust bank charters, broadening the pool of institutions potentially qualified to custody digital assets. This development could provide advisers with expanded custody options under a revised regulatory structure.
SEC Broadens Its Crypto Regulatory Agenda
The custody initiative represents one component of the SEC’s comprehensive effort to modernize crypto oversight. The agency recently introduced its Regulation Crypto Assets rule, establishing a customized framework for specific crypto offerings and associated market activities.
The SEC intends to develop crypto compliance standards for broker-dealers. Atkins has emphasized creating transparent regulations for tokenized securities as more financial institutions experiment with blockchain-based products and settlement infrastructure.
The SEC’s regulatory timeline suggests October as a potential target for releasing the crypto custody rule proposal. Agency timelines frequently shift as staff members review drafts, collect stakeholder input, and navigate approval procedures.
Investment advisers will likely await the formal proposal to understand final custody requirements. The forthcoming release should outline eligible custodian criteria, compliance obligations, client safeguards, and the SEC’s approach to treating crypto within modernized custody regulations.
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