The U.S. Securities and Exchange Commission (SEC) is re-evaluating its proposal to toughen cryptocurrency custody requirements.
Overview of the Proposal
SEC Acting Chairman Mark Uyeda announced that the agency is reconsidering the controversial rule first proposed in February 2023. The rule requires registered investment advisors to store cryptocurrency assets with a qualified custodian meeting certain legal requirements.
Speech in San Diego
Speaking at the Investment Company Institute’s 2025 Investment Management Conference in San Diego, Uyeda acknowledged concerns raised by interested parties. He noted, 'Given such concerns, there may be significant challenges to proceeding with the original proposal.' Therefore, Uyeda has tasked SEC staff to work closely with the crypto task force to evaluate appropriate alternatives.
Response and Implications
The custody rule was introduced under the Biden administration, where former SEC Chairman Gary Gensler sought to expand existing custody regulations to cover all client assets under an advisor's control. The proposal faced strong opposition from investment advisors, financial institutions, and crypto industry participants. The American Bankers Association and other financial industry groups had previously warned that the rule could have a 'significant impact' on their business operations as it might limit the number of banking institutions willing to serve the industry and exacerbate existing difficulties in securing custodial services.
The SEC is actively exploring alternative approaches to the custody proposal in response to market participants' concerns. Revising these rules requires a careful approach to balance between asset security and industry growth.
