SEC Readies Updated Rule for Crypto Custody - PYMNTS.com

The U.S. Securities and Exchange Commission is reportedly preparing an updated rule addressing the custody of crypto assets. While the precise scope has not been finalized, the measure is expected to modernize the existing adviser custody framework—currently under Rule 206(4)-2 of the Investment Advisers Act—to better account for the unique characteristics of digital assets, including private keys and blockchain-based ownership.

For the market, a clearer custody standard carries meaningful weight. Institutional investors and registered advisers have long cited custody uncertainty as a barrier to deeper crypto allocation. A formal rule could define who qualifies as a “qualified custodian,” how client assets must be segregated, and what audit or record-keeping requirements apply. That clarity may reshape how broker-dealers, banks, and specialized custody firms structure their offerings.

The key for observers is the rule’s final language—particularly its treatment of non-custodial arrangements and proof-of-reserve mechanisms. The SEC’s approach will signal how broadly it intends to extend traditional investor protections to digital assets, potentially influencing liquidity, counterparty risk, and the pace of institutional participation.