SEC May Overhaul Digital Asset Custody Rules, Says SEC Chair

At a recent digital asset roundtable at the SEC’s Washington headquarters, Securities and Exchange Commission Chairman Paul Atkins signaled a major shift could be coming to how brokers handle custody of digital assets. 

According to Atkins, the current framework that allows brokers to act as custodians for crypto may be outdated and in need of a complete overhaul. He suggested the possibility of repealing and replacing it altogether, especially given the limited adoption under the existing rules. 

So far, only two firms have received the SEC’s special-purpose broker-dealer designation, a clear indicator, Atkin said, that the existing structure has significant limitations rooted in policy decisions from the previous administration.

Atkins emphasized that broker-dealers have never been explicitly barred from holding either non-security crypto assets or crypto asset securities. There are rules about how investment firms must protect their customers and how much funds or assets they need to hold, but since these rules are lacking in digital assets, many giant players are hesitant to fully participate in the crypto space. Considering this lack of clarity, Atkins asked the staff at the SEC to review and possibly update the rules. 

He also hinted that much of the SEC’s crypto-related guidance issued since the Trump era should be considered highly temporary as the agency reconsiders its long-term approach to regulating the fast-evolving digital asset space. 

In essence, the SEC could be preparing to offer more flexibility and clearer guidance to industry players, especially hedge funds and trading firms, looking to take a more active role in safeguarding their digital holdings.

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