SEC Advances Revised Digital Asset Custody Framework to White House

The United States Securities and Exchange Commission has formally advanced its revised regulatory framework for digital asset custody to the White House for executive review. The legislative package represents the agency's latest effort to modernize safeguarding standards across registered investment advisers and traditional investment companies managing client exposure to cryptocurrencies.

According to a report published by The Defiant, the revised custody proposal follows the official withdrawal of an earlier, highly contested draft introduced in 2023. That previous iteration drew widespread criticism from institutional custodians, trade associations, and legal experts who argued that its stringent qualified custodian definitions would effectively bar regulated entities from handling on-chain assets. The updated measure aims to resolve these regulatory bottlenecks by offering clearer operational guardrails for segregating client funds, verifying wallet ownership, and maintaining institutional custody architectures.

The submission to the White House Office of Information and Regulatory Affairs marks a key procedural hurdle before the rules can be formally proposed or enacted. Under this framework, registered advisers will face structured compliance protocols regarding how private cryptographic keys are stored, audited, and protected against loss or insolvency. The interagency review will evaluate the economic impact, potential burdens on financial intermediaries, and alignment with overarching digital commerce priorities.

Financial institutions managing spot crypto exchange-traded funds and digital asset trusts have operated under patchwork guidance for several years. A formalized, predictable rulebook is expected to clarify institutional obligations, though market participants remain cautious about compliance costs and technical feasibility. The broader investment management sector has consistently called for standards that accommodate multi-signature security models and decentralized protocol interactions without creating excessive legal ambiguity.

As the White House review proceeds, market stakeholders are watching for details on transition timelines, grandfathering provisions for existing custody arrangements, and specific exemptions for regulated trust banks. The final disposition of this rulemaking will serve as a foundational benchmark for institutional participation in digital asset markets across the United States.