The U.S. Securities and Exchange Commission (SEC) is set to overhaul regulations governing the custody of digital assets for investment advisory firms and funds. The new rules will allow direct custody of digital assets under specific conditions and broaden the range of eligible custodial institutions.
On Thursday, The Block reported that the SEC has proposed new custody regulations for registered investment advisers and funds dealing with digital assets.
Custody services involve safeguarding and managing clients’ assets on their behalf. The crux of this service in the digital asset space is the secure management of private keys essential for accessing and transferring these assets.
This regulatory overhaul was prompted by the recognition that existing rules fail to adequately address the unique characteristics of digital assets. It aims to clarify the ambiguities surrounding compliance for investment advisers and funds looking to invest client money in digital assets.
Under certain circumstances, the proposed rules would permit investment advisers and funds to directly custody digital assets. The proposal also includes provisions for entrusting digital asset custody to state-regulated trust companies.
The SEC explained that these changes would lower barriers for investment advisers offering guidance on digital assets and expand potential fund investment strategies.
The SEC plans to publish the proposed regulations in the Federal Register and will accept public comments for a 60-day period.