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US SEC Proposes Digital Asset Storage Rule for Investment Advisers

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On February 15, the United States Securities and Exchange Commission (SEC) will propose a rule that will effectively require registered investment advisers to …

US SEC Proposes Digital Asset Storage Rule for Investment Advisers

On February 15, the United States Securities and Exchange Commission (SEC) will propose a rule that will effectively require registered investment advisers to store digital assets outside the cryptocurrency industry. The rules proposed by the US SEC on Wednesday will expand the existing provisions of the agency, that is, investment advisers need to hand over clients’ funds and securities to “qualified custodians” for safekeeping. If the new version is approved, it will increase the protection requirements for any assets (including cryptocurrency) entrusted by the investment adviser.

US SEC proposal may prohibit investment advisers from custody of assets in encryption companies

Interpretation of the news:


The United States Securities and Exchange Commission (SEC) announced on February 15th, 2021, that it will propose a rule that will require registered investment advisers to store digital assets outside the cryptocurrency industry. This rule is an expansion of the SEC’s prior provisions, which stipulate that investment advisers must hand over clients’ funds and securities to “qualified custodians” for safekeeping. If the new rule is approved, it will significantly increase the protection requirements for any assets, including cryptocurrency, entrusted to an investment advisor.

The proposal aims to address the increasing use of digital assets as an investment vehicle and the unique risks associated with their storage and safeguarding. This is part of the SEC’s efforts to maintain investor protection and prevent fraud and other illegal activities in the crypto industry.

The proposed rule will mean that investment advisers cannot hold digital assets themselves or have them stored with a “qualified custodian” within the cryptocurrency industry. Instead, they must store such assets at a qualified custodian, which could include a bank, a broker-dealer, or a futures commission merchant. This will ensure that the assets are held with entities that are regulated, insured, and have a proven track record of safekeeping assets.

This proposal is in line with similar regulations being rolled out worldwide, such as the EU’s recent Markets in Crypto-Assets (MiCA) regulation. As the use of cryptocurrencies and digital assets continues to grow, governments and regulators acknowledge the need to provide investor protection and prevent illicit activities.

In conclusion, the proposed SEC rule is a significant step in regulating the use of digital assets by registered investment advisers. The rule will increase investor protection, minimize risks, and deter fraudulent activities. It also shows how regulators are adapting to the fast-evolving cryptocurrency industry and underscores the importance of staying informed about regulatory changes and trends.

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