SEC Proposes Letting Advisers’ Clients Self-Custody Crypto, Reversing 2022 Stance

A new proposal would ease custody rules for investment advisers handling digital assets, three years after the agency pushed in the opposite direction.

The Securities and Exchange Commission has put forward new rules aimed at easing custody requirements for investment advisers who work with crypto assets. According to reports from Cryptopolitan, Coinfomania, Crypto News Flash and Cointelegraph, the proposal would open a path for advisers to let clients hold their own digital assets rather than routing them through a qualified custodian.

The proposal stands in contrast to an earlier SEC effort from roughly three years ago. That prior proposal sought to expand custody obligations, pushing advisers toward stricter third-party custody arrangements for crypto holdings. Critics at the time argued the approach was impractical, since few qualified custodians existed for many digital assets.

The custody rule has long been a point of friction between the SEC and the digital asset industry. Investment advisers are generally required to safeguard client funds through qualified custodians, a framework built for traditional securities. Applying that same framework to crypto proved difficult, given the limited number of banks and trust companies equipped to custody tokens.

By proposing a self-custody option, the SEC appears to be acknowledging those practical constraints. Advisers could potentially offer crypto exposure to clients without requiring every asset to pass through a qualified custodian. Cointelegraph described the move as clearing a custody hurdle that had constrained advisers wanting to offer crypto services.

Coinfomania’s reporting framed the rules as potentially transformative for how custody is handled across the industry. If adopted, the change could reshape how registered investment advisers structure their crypto offerings to retail and institutional clients. It could also influence how custodians, exchanges and wallet providers position their services for the advisory market.

The reversal reflects a broader shift in regulatory posture toward digital assets. Market structure and custody rules have been central to the ongoing debate over how crypto should be regulated alongside traditional securities. The earlier 2022-era custody proposal was widely seen as restrictive by industry participants, who argued it discouraged innovation and limited adviser access to digital assets. The new proposal suggests regulators are now weighing a more flexible framework, one that accounts for the unique technical features of self-custody and blockchain-based asset management.

As with any proposed rule, the measure would likely go through a public comment process before any formal adoption. The sources reviewed did not specify a timeline for finalization or detail every provision of the proposal. Industry participants and legal observers are expected to weigh in as more details emerge.

Market Impact

If finalized, the rule change could reduce compliance friction for registered investment advisers offering crypto services to clients. Easing custody requirements may encourage more advisers to add digital assets to client portfolios, potentially broadening retail and institutional access through regulated channels.

The shift could also affect the competitive landscape for custody providers, wallet infrastructure firms and exchanges that serve the advisory market. A move toward self-custody options may reduce reliance on traditional qualified custodians for certain crypto holdings, though demand for institutional custody services is unlikely to disappear entirely given risk management needs.

The proposal signals a notable shift in how the SEC approaches crypto custody for investment advisers. Further details are expected to surface as the rulemaking process moves forward.

Frequently Asked Questions

What did the SEC propose?

The SEC proposed rules that would allow investment advisers to let clients self-custody their crypto assets, according to multiple reports.

How does this differ from the SEC’s earlier position?

Roughly three years earlier, the SEC had proposed expanding custody requirements, pushing advisers toward stricter third-party custody arrangements for digital assets.

Why has crypto custody been a difficult issue for advisers?

Traditional custody rules require qualified custodians, but few such custodians exist for many digital assets, making compliance challenging for advisers offering crypto.

Is this rule change final?

The reports describe a proposal, which would typically need to go through further regulatory steps, including public comment, before being finalized.

Who would be affected by the change?

Registered investment advisers offering crypto services, along with custody providers and clients seeking digital asset exposure, could be affected if the rule is adopted.

Original source: AltcoinGordon

Syndicated coverage. Originally reported by altcoingordon.com.