The U.S. Securities and Exchange Commission (SEC), Wall Street’s regulator, has proposed a new framework for the custody of cryptocurrencies.
The proposed framework would allow investment advisers and regulated funds to engage in self-custody of digital assets.
Self-custody of crypto means people and institutions hold their own private keys and maintain complete, direct control over their digital assets without relying on third-party intermediaries.
In announcing the proposed change, the SEC said it is trying to update rules to meet the requirements of the evolving crypto industry.
“Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace,” said the SEC in a statement.
The proposal would permit crypto assets to be held in self-custody under certain circumstances and allow state trust companies to serve as custodians for clients.
This is important for asset managers, hedge funds, and other institutional investors who want to hold Bitcoin (CRYPTO: $BTC) and other digital assets directly rather than through an exchange-traded fund (ETF) or another intermediary.
The proposal would also allow advisers to self-custody client and regulated crypto assets under certain circumstances, including when the adviser determines that no other custodian is available.
The SEC stressed that the proposal relates to advisers who are acting as custodians for their clients’ assets, rather than individual investors directly controlling their own crypto custody.
The proposal is now open for a 60-day public comment period. Some analysts said that the change could lead to greater adoption of Bitcoin and other crypto by institutions.
BTC is trading at $86,500 U.S. on Oct. 2, having rallied 42% in this year’s third quarter.
