Reg Wrap: SEC proposes new crypto custody rules - thebanker.com

The U.S. Securities and Exchange Commission has proposed new rules governing how regulated firms hold crypto assets for clients. The proposal addresses a long-standing gap: existing custody requirements were written for traditional securities, leaving unclear how investment advisers and broker-dealers should safeguard digital assets that sit on blockchains rather than in conventional accounts. The rules would set expectations around segregation, recordkeeping, and the qualified custodians permitted to hold client crypto.

For markets, the significance lies in what clearer custody standards could unlock. Institutional investors have often cited custody uncertainty as a barrier to broader participation. A defined framework may make crypto exposure easier to offer through regulated channels, though it could also raise compliance costs and push some activity toward jurisdictions with lighter rules.

What to watch: the comment period, where industry pushback typically shapes final language; whether the requirements prove workable for firms holding assets across multiple blockchains; and how other regulators, including banking supervisors, align their own custody guidance. Until a final rule is adopted, the practical effect on firms and investors remains uncertain.