SEC Proposes Digital Asset Custody Rules and Regulatory Framework to White House

The U.S. Securities and Exchange Commission (SEC) has taken significant steps towards regulating digital assets by submitting two proposals to the White House for review. The first proposal, submitted on August 25, focuses on digital asset custody, aiming to clarify how investment advisers and companies can manage crypto assets for their clients. This initiative is part of SEC Chairman Paul Atkins' efforts to modernize the agency's regulatory framework.

In addition, the SEC has proposed a comprehensive regulatory framework for digital asset fundraising, known as “Regulation Crypto Assets.” This proposal, forwarded to the White House on August 18, introduces exemptions from traditional securities registration, allowing early-stage projects to raise up to $5 million over four years without full registration. A larger exemption permits raises of up to $75 million within a year, contingent on audited financials and ongoing reporting.

One of the most notable features of the fundraising proposal is the conditional “investment contract safe harbor,” which would allow crypto tokens to be reclassified as non-securities once the founding team's management efforts cease. This aims to provide clarity on when a token stops being classified as a security, addressing a longstanding legal ambiguity.

The proposals are currently under review by the Office of Management and Budget, and details will be released following this process. Should the proposals proceed, a public comment period of at least 60 days will follow, allowing stakeholders to provide feedback before final rules are drafted and voted on by the commission.

Latest Developments on SEC Crypto Custody Rules

• The SEC has submitted its proposed amendments to the custody rules for digital assets to the White House, with the filing reaching the Office of Management and Budget (OMB) on August 25.
• This proposal is categorized as economically significant, indicating it could have an annual economic impact of at least $100 million.
• The filing is part of a deregulatory initiative under Executive Order 14192, which encourages the elimination of ten existing rules for every new rule introduced.
• The SEC aims to relax custody duties for investment advisers holding client crypto assets, moving away from the stricter requirements imposed by former Chair Gary Gensler.
• A formal proposal is expected in October, which will initiate a public comment period on the new rules.
• Recent advocacy from firms like Andreessen Horowitz and Delphi Ventures has influenced the rewrite, pushing for the inclusion of multi-signature and multi-party computation (MPC) wallets for enhanced security.
• This custody rule proposal follows closely on the heels of the SEC's Regulation Crypto Assets, which outlines how projects can raise funds through token offerings.
• Congress is currently deliberating the Clarity Act, which would delineate oversight responsibilities between the SEC and the CFTC, but its future remains uncertain as it awaits a Senate vote.

New Developments in SEC's Digital Asset Custody Rules

• The SEC submitted a proposal to the White House on August 25 aimed at overhauling custody rules for digital assets.
• This proposal is part of SEC Chairman Paul Atkins’ initiative to modernize the agency's crypto framework.
• The proposal focuses on clarifying the existing custody framework, modernizing outdated regulations, and removing provisions that no longer provide meaningful investor protections.
• Currently, the proposal is under review by the Office of Management and Budget (OMB), and the specific regulatory text has not been made public.
• A public comment period of at least 60 days will follow once the SEC formally publishes the proposal.
• This initiative builds on a previous no-action letter from September 2025 that allowed select state-chartered trust companies to act as qualified custodians for digital assets.
• The custody overhaul is part of a broader push by the SEC to update regulations around crypto assets, which is occurring without comprehensive legislation from Congress.
• The proposal could significantly impact the competitive landscape among custodians, depending on how "qualified custodian" is defined for digital assets.

New Developments on SEC's Digital Asset Custody Proposal

• The SEC has proposed amendments to clarify the framework for the custody of crypto assets, targeting investment advisers and companies.
• This proposal aims to modernize regulations and remove outdated provisions that no longer serve investor protection due to market evolution.
• The proposal was sent to the White House after a delay in voting on the Clarity Act, which pro-crypto lawmakers hoped to pass before the August recess.
• CFTC Chairman Michael Selig plans to proceed with rulemaking regardless of the Clarity Act's status, aiming to finalize rules before the current administration's term ends.
• SEC Chair Paul Atkins has expressed commitment to supporting Congress in advancing the Clarity Act.