Custody
SEC Proposes New Custody Framework for Crypto Assets Aimed at Advisers and Funds
The U.S. Securities and Exchange Commission (SEC) has proposed a new custody framework aimed at investment advisers and registered funds that handle cryptocurrency assets. This proposal, published on October 1, 2026, seeks to modify existing requirements related to adviser audits and broker-dealer custodial services.
Key aspects of the proposal include the possibility of self-custody in certain circumstances and the use of state trust companies as custodians. However, it is important to note that this is a proposal and not yet a finalized regulation, with a public comment period of 60 days following its publication in the Federal Register.
The SEC's approach addresses a significant challenge in institutional crypto: proving control and segregation of assets to clients and regulators. While the tailored framework could offer new legal access options, it also introduces various custody, governance, and cyber risks that need careful consideration.
As the proposal progresses, stakeholders will need to monitor how the final rules are shaped by public feedback and what practical implications they will have for the custody of digital assets. The SEC's initiative is part of a broader shift toward regulated fund custody, highlighting the need for clarity and accountability in the evolving crypto landscape.
New Developments in Crypto Asset Management
On October 26, HashKey RWA launched the first product in its hToken series, which is linked to Class A units of HashKey Fintech Opportunities Limited. This initiative aims to create a standardized structure for issuing tokenized securities and managing their lifecycle.
The hToken is designed specifically for eligible professional investors and is not intended for retail token speculation. It emphasizes the importance of understanding the legal rights associated with the tokens, as holding a token does not automatically confer legal title to a fund unit.
HashKey's objective is to simplify the token issuance process for traditional financial institutions, although it acknowledges that legal differences between funds and jurisdictions still exist. The company aims to industrialize tokenization, but the success of this initiative will depend on the adoption of the structure by other managers.
Investors are advised to be cautious about conflating transaction speed with liquidity, as the latter is influenced by the characteristics of the underlying assets and counterparties.
FAQ
What is the purpose of the SEC's proposed custody framework for crypto assets?
The SEC's proposed custody framework aims to modify existing requirements for investment advisers and registered funds that handle cryptocurrency assets, addressing challenges related to proving control and segregation of assets.
When was the proposal published and what is the duration of the public comment period?
The proposal was published on October 1, 2026, and there is a public comment period of 60 days following its publication in the Federal Register.
What are some key aspects of the proposed custody framework?
Key aspects include the possibility of self-custody in certain circumstances and the use of state trust companies as custodians.
What risks does the proposed framework introduce?
The proposal introduces various custody, governance, and cyber risks that need careful consideration as stakeholders assess its implications.
Why is the SEC's initiative significant in the context of the crypto landscape?
The SEC's initiative is significant as it represents a broader shift toward regulated fund custody, highlighting the need for clarity and accountability in the evolving crypto landscape.