SEC proposes self-custody route for advisers holding client crypto

The SEC proposed allowing registered investment advisers to self-custody client crypto assets when they document that no permitted custodian is available.

That route has conditions.

An adviser would need safeguarding expertise, private-key controls requiring joint authorization by at least two people, an annual cybersecurity review and an internal control report within six months and annually afterward. Clients would receive statements at least quarterly.

Regulated fund boards would oversee self-custody arrangements. A separate part of the proposal would let advisers and regulated funds use state trust companies as crypto custodians under specified safeguards.

The proposal is not in force. Comments will remain open for 60 days after the proposing release is published in the Federal Register.