SEC officials promote idea for initiative on crypto custody

Two SEC officials promoted the idea of an initiative on cryptocurrency custody, separate from the agency's previous proposal on the custody of assets more generally.

Republican Commissioner Hester Peirce, who leads the agency’s new crypto task force, said “there are some unique issues around crypto and custody” that could warrant an initiative separate from the SEC’s proposal on the custody of assets more generally. However, she gave the caveat that she didn’t want to “pre-judge what the new chairman’s agenda will be,” speaking March 6 at the Investment Adviser Association’s annual compliance conference in Washington.

In February 2023, the agency issued a proposal amending its existing custody rule and expanding the scope of assets subject to custodial oversight — including art, cash, commodities, crypto and other non-traditional assets. The proposal would require investment advisers to maintain such assets with a qualified custodian, though the rule received significant pushback and has yet to be finalized.

President Donald Trump's nominee to lead the SEC, Paul Atkins, is expected to be friendlier to the crypto industry, though he’s still awaiting Senate confirmation, and the Senate Banking Committee hasn’t scheduled his confirmation hearing yet.

Since acting Chair Mark Uyeda took over, the SEC signaled a major reversal in its approach to crypto, with the agency launching a crypto task force and dismissing its lawsuit against crypto company Coinbase.

Natasha Vij Greiner, director of the SEC’s division of investment management, said on March 7 at the IAA Conference that the task force is working closely with several of the SEC’s divisions, including investment management.

The agency’s “really starting somewhat from scratch” on crypto, Greiner added, though she said that crypto custody is a “critical question.”

Grenier said she agreed with Peirce that “removing crypto from the custody proposal is likely the right move.”

Ultimately, “once the chairman is confirmed and kind of comes in, we will talk about some of the outstanding proposals and how and if we want to move them forward,” she added.