SEC proposes crypto custody rule for advisers and funds

The SEC formally proposed its long-awaited crypto custody rule on October 1, giving investment advisers and funds a defined path for holding client crypto assets and opening the proposal for a 60-day public comment period. The 760-page draft clarifies which firms can serve as custodians, permits adviser self-custody in limited circumstances, allows state-chartered trusts, and sets security, recordkeeping and quarterly-review requirements.

Chair Paul Atkins said in an X post that the framework gives advisers and funds a compliant pathway to hold crypto assets, adding: "Onchain markets should not be relegated offshore or forced into ill-fitting regulatory models."

• The proposal would replace the 2023 custody rule under former Chair Gary Gensler, which never reached final form.
• The release marks a swan song for Commissioner Hester Peirce, the inaugural Crypto Task Force chief, who exits the SEC on Oct. 2; the agency also cut its quorum requirement to two commissioners.