SEC Proposes New Custody Rules for Investment Advisers and Regulated Funds Holding Crypto Assets

The Securities and Exchange Commission (SEC) has announced a new proposal featuring rules and amendments designed to create a tailored regulatory framework for the custody of crypto assets. The initiative targets registered investment advisers and regulated funds, including registered investment companies and business development companies. Under federal securities laws, safeguarding client assets is a core regulatory requirement. The SEC's proposed framework aims to address the unique operational and technological characteristics of digital assets, ensuring that investment advisers and funds implement appropriate protections when holding crypto assets on behalf of investors. The proposed rules seek to modernize existing custody standards to explicitly account for crypto assets, setting clear compliance expectations for market participants while enhancing overall investor protection across regulated financial services. Further details and comment periods will follow as the regulatory proposal moves through the standard administrative rulemaking process.