The US Securities and Exchange Commission has proposed changes to federal custody rules for digital assets after Chair Paul Atkins said existing securities regulations did not keep up with Bitcoin’s rise since 2008.

The proposal would update the Investment Advisers Act and the Investment Company Act to give registered investment advisers and regulated funds a clearer framework for holding crypto assets. According to the SEC chair, the aim is to replace outdated standards with rules better suited to today’s market.

A response to an outdated rule set

Atkins said the current framework was not designed for an asset class that has grown into a multi-trillion-dollar market. In that view, the agency’s latest proposal is meant to modernize custody requirements rather than rely on rules built before crypto became a significant part of financial markets.

The SEC’s proposal focuses on how advisers and funds can custody digital assets within federal securities law. By amending the two existing statutes, the agency is seeking to set out a more explicit path for firms that want to handle crypto in a regulated way.

What the proposal would change

Two elements stand out in the draft. First, registered advisers could in some cases permit clients to keep custody of their own crypto assets, rather than requiring all holdings to sit with a third-party custodian.

Second, the proposal would allow state-chartered trust companies to qualify as custodians. That would broaden the list of eligible providers beyond the more traditional categories of banks and broker-dealers.

Rulemaking moves ahead after legislative stall

The SEC’s move comes after the CLARITY Act stalled, shifting the issue back into the agency’s rulemaking process. Instead of waiting for new legislation, the commission is advancing a regulatory proposal through its existing authority.

That makes the current process especially important for market participants that have been waiting for a clearer custody standard for digital assets under federal securities rules.

Public comment is the next confirmed step

The proposal will be open for public comment for 60 days after it is published in the Federal Register. Stakeholders are expected to focus in particular on the self-custody provision and on the proposed recognition of state-chartered trust companies as eligible custodians.

If adopted, the changes would mark a notable shift in how the SEC approaches crypto custody for advisers and funds. For now, the immediate next step is the formal comment period, which will determine how industry participants, custodians, and other observers respond to the agency’s draft framework.

Source: beincrypto.com