SEC Moves to Rewrite Adviser Custody Rules for Crypto, Reviving a Fight It Lost in 2023

The SEC sent a proposal to rewrite its custody rules for investment advisers to the White House on Tuesday, taking the first procedural step toward a rulemaking that would tell advisers and funds how they may hold crypto assets. The Office of Information and Regulatory Affairs logged the submission on Aug. 25 under RIN 3235-AN46, titled Amendments to the Custody Rules.

The filing lists the proposal as economically significant and designates it deregulatory under Executive Order 14192. It would amend rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. The SEC said that the rulemaking would remove burdens from outdated provisions no longer needed for investor protection. The agenda sets a target of October for the formal proposal.

The SEC under Gary Gensler in 2023 had pushed to require advisers to place client crypto with a narrow set of qualified custodians, generally a chartered bank or trust company, an SEC-registered broker-dealer, or a CFTC-regulated futures commission merchant. Financial firms, crypto platforms and a fellow federal agency objected. Lawyers at the Small Business Administration warned that the agency had underestimated the effect on smaller advisers, and investment firm a16z called the proposal “illegal, infeasible, and dangerous.” It never reached a final vote and was pulled last year.

The current SEC under Chair Paul Atkins has taken a friendlier approach to the crypto industry, proposing fundraising rules last week. A separate near-term item on the agenda, RIN 3235-AN48, would clarify crypto compliance for broker-dealers, and the long-promised innovation exemption for tokenized securities is still pending. The landscape has also shifted since 2023: a wave of new federal trust bank charters has expanded the set of institutions able to custody digital assets.

Related Listen: Could Some Vaults Trigger Securities Law? Yes, but It’s Case by Case

{"@context":"http:\/\/schema.org\/","@id":"https:\/\/unchainedcrypto.com\/sec-moves-to-rewrite-adviser-custody-rules-for-crypto-reviving-a-fight-it-lost-in-2023\/#arve-youtube-xqb-2g6oqte","@type":"VideoObject","embedURL":"https:\/\/www.youtube-nocookie.com\/embed\/xqb-2g6OqtE?feature=oembed&iv_load_policy=3&modestbranding=1&rel=0&autohide=1&playsinline=1&autoplay=0"}

The post SEC Moves to Rewrite Adviser Custody Rules for Crypto, Reviving a Fight It Lost in 2023 appeared first on Unchained.