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The SEC is taking action. On Thursday, the U.S. regulator proposed a set of rules that would change how investment advisors and regulated funds can hold crypto assets on behalf of their clients. This marks a significant regulatory shift, even though the political climate surrounding the sector remains complicated.
Why It Matters
The SEC's proposed rules signify a cautious yet notable step towards integrating cryptocurrencies into the mainstream financial advisory landscape, reflecting an acknowledgment of the growing demand for crypto investment options. By allowing advisors to hold crypto assets directly under specific circumstances, the proposal could enhance accessibility for investors while also highlighting the ongoing tension between innovation and regulatory compliance in the rapidly evolving crypto market. This move may influence the development of custodial solutions and compliance frameworks, shaping the future of how digital assets are managed within traditional finance.
The core of the proposal: advisors could hold their clients’ crypto assets themselves—but only when no authorized custodian is available. It’s not a wide-open door, but a slightly ajar one, with conditions. The SEC also wants blockchain records to satisfy certain compliance requirements. Additionally, state trust companies—lesser-known entities to the general public—could also act as custodians for crypto assets held on behalf of clients or regulated funds, again subject to specific conditions that the SEC has not yet fully detailed publicly.
No custodian? Hold it yourself.
That’s essentially what the rule says. And it’s quite pragmatic for a regulator recently accused of systematically blocking the crypto industry. The market has changed, and so have the pressures. Paul S. Atkins, chairman of the SEC, made it clear: the crypto asset market, born with Bitcoin in 2008, has become a multi-billion-dollar asset class. Current rules have not kept pace. Atkins wants to bridge this gap. He put it plainly: his goal is to make the United States the “crypto asset capital of the world.” Not a trivial statement from the head of the main U.S. financial regulator.
Clarity Act Stalled, but SEC Moves Forward
The timing is no coincidence. Last month, the Clarity Act—a bill aimed at clearly distinguishing digital assets as securities, commodities, or stablecoins—failed to secure the necessary votes to advance. It was blocked during a procedural vote. A legislative death, at least for now.
But the SEC didn’t wait. Even before this failed vote, the regulator had already sent a proposal to the White House to clarify the custody framework for crypto assets. In other words: Washington blocks on one side, the SEC pushes on the other. It’s probably intentional. Atkins, who clearly supports the sector, doesn’t want legislative inaction to become an excuse for not regulating. And he’s right on one point: investment advisors managing portfolios that include Bitcoin or other digital assets are currently navigating a regulatory gray area that benefits neither them nor their clients.
The failure of the Clarity Act thus leaves a void. The SEC is trying to fill it through regulation, which is slower, more limited, but feasible without a Congressional vote.
Blockchain as a Compliance Tool
One of the most interesting—and probably least commented on—aspects of the proposal is the idea of using blockchain records to meet compliance requirements. It may seem technical, but it’s actually quite symbolic. The SEC would formally recognize that blockchain can serve as a reliable register in a regulatory framework. Not just a speculative tool. A serious traceability tool.
State trust companies might be the real surprise of the proposal. These entities already exist in several U.S. states, but their role in holding crypto assets for regulated funds was unclear. The SEC wants to formally integrate them into the framework, under conditions. This opens an alternative path to traditional large custodians, who have been slow to adapt to digital assets.
The open question: what exactly are these “specific conditions”? The SEC hasn’t detailed everything. It’s still unclear on thresholds, capital requirements, reporting obligations. Details will likely come during a public comment period, as is customary for this type of regulatory proposal in the United States.
Atkins reiterated his commitment to move forward, obstacles or not. The crypto asset market has been waiting for stable rules for years.
Frequently Asked Questions
What exactly is the SEC proposing for crypto asset custody?
The SEC proposes that investment advisors can hold their clients’ crypto assets themselves in the absence of an authorized custodian, and that blockchain records can be used to meet certain compliance requirements. State trust companies could also act as custodians under conditions.
Why did the Clarity Act fail in Congress?
The Clarity Act, which aimed to classify digital assets as securities, commodities, or stablecoins, failed to secure the necessary votes during a procedural vote last month. It is currently stalled, with no known return date.
Who is Paul S. Atkins and what is his role in this matter?
Paul S. Atkins is the chairman of the SEC. He supports the crypto sector and has stated his intention to make the United States the “crypto asset capital of the world.” He is pushing this new rules project despite legislative blockage in Congress.
