SEC Sends a Crypto Custody Proposal to the White House

The Securities and Exchange Commission (SEC) has sent a proposal on digital-asset custody to the White House for review, Bitcoin Magazine reported. The text is not public, which is normal at this stage of the process. CoinDesk noted that the agency is attempting to complete a rule the previous administration could not finish. A 2023 attempt would have narrowly restricted where investment advisers could hold client crypto. It drew heavy opposition and was never finalized.

Custody is the rule that decides who can hold client assets and under what conditions, so it determines which businesses qualify as a place a regulated fund can keep coins. A broad definition of a qualified custodian brings state trust companies and crypto-native firms inside the perimeter. A narrow one pushes advisers toward a short list of bank custodians and, indirectly, toward exchange-traded products where the custody question is already answered.

The timing matters because Congress has not passed legislation. A Senate vote on market-structure legislation has stalled, leaving the governing rules to agency discretion. Regulators are proceeding regardless, which means the operative United States framework for the next year is likely to come from rulemaking and enforcement rather than from statute.

Until the text appears, the direction the rule will take is not knowable. The two outcomes that matter are a rule that admits a wide set of custodians, spreading counterparty risk across more firms, or a rule that concentrates client assets in a handful of banks, reducing the number of entities regulators must supervise while raising the cost of a single failure.