SEC Sends Crypto Custody Rule Overhaul to White House for Review

As Bitcoin and the broader crypto market have surged in recent days, the U.S. Securities and Exchange Commission is moving to update how registered investment advisers and investment firms are required to safeguard crypto assets. Bloomberg reported that the SEC submitted a proposed rulemaking to the White House Office of Management and Budget (OMB) on August 25. Filed in the SEC's regulatory agenda as "Amendments to the Custody Rules," the proposal is intended to modernize existing custody requirements that govern how investment advisers and mutual funds protect client assets. A core focus is addressing ongoing uncertainty around the custody of crypto holdings and clarifying how such assets can be held in compliance with current SEC standards. The draft would also eliminate certain custody provisions the SEC now considers outdated, reflecting changes in market structure and current trading and storage practices. Process-wise, the proposal will go through OMB review before returning to the SEC for consideration. It must be approved by a vote of SEC commissioners prior to publication, after which it will enter a public comment period of at least 60 days. A final commission vote would be required before any rule takes effect. Market participants say clearer custody rules are especially important for institutional investors, including investment advisers and investment firms, for whom compliant crypto storage requirements are a key operational issue. This is not investment advice.