SEC Proposes Rule Permitting Investment Advisers to Custody Bitcoin for Clients

The US Securities and Exchange Commission has introduced a proposal that could allow registered investment advisers to directly hold Bitcoin and other digital assets for their clients. Because these professionals oversee more than $100 trillion in combined assets, even modest allocations could direct meaningful capital into digital currencies. Historically, advisers have avoided acquiring Bitcoin within managed accounts due to restrictive custody rules that required qualified custodians without providing clear standards for holding private keys.

The draft framework updates both the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Under the proposed changes, state trust companies could qualify as custodians provided they maintain written safeguarding policies and produce annual audited financials. Registered broker-dealers could also qualify under established customer protection standards. Regulated funds could expand their crypto offerings, and airdropped tokens may fall within the framework under specific conditions.

SEC Chair Paul Atkins stated that cryptocurrency has transitioned from an early curiosity into a multi-trillion-dollar asset class, observing that existing rules have failed to keep pace. The proposal follows other digital asset regulatory measures introduced by the agency in September, following the Senate's failure to advance the CLARITY Act. Notably, the draft also contemplates allowing advisers to custody private keys themselves under strict compliance conditions.