SEC Rewrites Crypto Custody Framework as Plan Enters White House Review
A revised SEC digital asset custody proposal governing advisers and funds has formally entered White House administrative review.
The United States Securities and Exchange Commission has submitted a revised digital asset custody framework to the White House for formal administrative review, marking a pivotal step in establishing permanent compliance standards for investment advisers and fund managers. The initiative seeks to codify clear rules for handling, safeguarding, and verifying customer digital assets.
The planned measure specifically outlines obligations for registered investment advisers and regulated investment companies when selecting custodians to hold cryptocurrencies and tokenized securities. The submission comes after the regulatory body formally withdrew an earlier 2023 safeguarding proposal that faced significant pushback from both institutional custodians and digital asset service providers, according to details reported by The Defiant.
Custody rules have remained among the most fiercely debated regulatory topics in the digital asset sector. Traditional safeguarding frameworks historically assumed assets were held in physical certificates or standardized clearinghouses. Applying these standards to decentralized private keys created legal and operational hurdles for institutional asset managers looking to allocate capital to digital asset markets without violating fiduciary custody obligations.
Institutional market participants and custody providers have cautiously welcomed the updated rewrite, expressing optimism that the administration will provide workable operational pathways for qualified custodians. Clear definitions regarding segregated on-chain wallets, multi-party computation security architectures, and staking mechanisms are widely anticipated in the updated draft.
Following clearance by the White House Office of Management and Budget, the proposed rule will proceed toward formal publication and agency voting. Market participants will scrutinize the final text to evaluate capital requirement changes and the operational impact on banks seeking to offer institutional digital custody services.
Key takeaways
- The SEC's revised crypto custody rule proposal has moved to the White House for formal administrative review.
- The framework targets registered investment advisers and funds, aiming to clarify digital asset safeguarding requirements.
- The submission follows the withdrawal of a contentious earlier proposal introduced in 2023.