SEC proposes letting investment advisers and funds self-custody Bitcoin and other crypto

The useful part

Commission has proposed a framework that would allow investment advisers and regulated funds to hold Bitcoin and other crypto assets themselves, under certain conditions, and to use state trust companies as custodians. The proposal, announced on 1 October and reported by The Block, aims to close gaps in the infrastructure institutions need to hold digital assets directly rather than through exchange-traded funds or other intermediaries. It would apply to investment advisers and regulated funds, a group that includes asset managers and hedge funds.

How it works

• That would make ETF flow data a less complete measure of institutional demand over time.
• A clearer framework could make direct ownership more workable.
• The plan now enters a 60-day public comment period and is not yet a final rule.
• SEC Chair Paul Atkins said the agency's rules had not kept pace with a crypto market now worth trillions of dollars.
• Commissioner Hester Peirce said regulators should protect investors' right to self-custody rather than force them to hold assets with a third party.

What to take from it

Why it matters Custody has long been one of the practical obstacles for professional money managers considering direct crypto holdings. Current rules generally require advisers to keep client assets with a qualified custodian, which has pushed many toward ETFs as the simplest route into Bitcoin. It does not require any adviser or fund to buy crypto, and any effect on allocations is likely to be gradual.

Details worth keeping

The proposal removes a barrier but does not by itself create demand.