Regulator Proposes Custody Rules for Adviser Crypto

A Wall Street regulator has proposed new rules for investment advisers that hold crypto assets on behalf of clients. The measure targets an area of finance where digital currencies meet longstanding fiduciary and safekeeping obligations.

The proposal focuses on custody, the process by which assets are held and protected for investors. For advisers, crypto custody raises questions about how private keys, trading venues and recordkeeping should be managed under existing oversight frameworks.

Digital assets do not fit neatly into traditional custody models. Unlike securities held at established custodians, crypto can be stored in wallets and moved across blockchain networks, creating operational and security risks. Regulators have been weighing how to apply investor protection standards to a market that operates around the clock and across borders.

The proposal is likely to draw attention from asset managers, crypto firms and consumer advocates. Industry participants may seek clarity on compliance costs and operational requirements, while investor groups may press for robust safeguards. Any final rule would probably follow a public comment period, a process that can reshape a draft before it takes effect.