The U.S. Securities and Exchange Commission has taken a new step to modernize how crypto assets are held and managed, filing a rule proposal this week aimed squarely at updating custody requirements for the digital-asset era. What the SEC proposed - In a rule change submitted Tuesday, the SEC said it wants to “improve and modernize the regulations” governing custody of crypto assets. - The draft rule would “clarify the framework for the custody of crypto assets” for investment advisers and investment companies and remove “burdens from certain outdated provisions that are no longer needed to provide investor protection given the evolution in the markets and security trading and holding practices,” the proposal states. Why it matters Custody rules determine how funds and advisers hold client assets — a core element of investor protection. Modernized custody guidance tailored to crypto could reduce regulatory uncertainty for advisers and funds, and better align oversight with current blockchain custody and security practices. Context: policy push continues despite stalled legislation - The SEC moved while a congressional vote on the Crypto Clarity Act (often styled the CLARITY Act) remains stalled. That bill seeks broader regulatory clarity and investor protections for the crypto sector. - The agency has nonetheless been actively pursuing crypto-friendly initiatives in recent weeks. Notably, the SEC is preparing an “innovation exemption” that could permit 24/7 trading of tokenized stocks on the blockchain — a move that would expand trading hours and market structure options for tokenized securities. Political and regulatory signals - Last week, the president urged lawmakers to pass the Crypto Clarity Act, and SEC Chair Paul Atkins has said he is “committed to supporting Congress in advancing” the bill. - Still, the SEC’s new custody proposal is narrower in scope than the CLARITY Act. But it fulfills the agency’s stated intent to press forward with targeted crypto rulemaking even if broader legislation stalls. What’s next The custody proposal must go through the SEC’s rulemaking process — including public comment and potential revisions — before any final rule is adopted. If enacted, the changes could provide clearer guardrails for advisers and investment companies custodying crypto, and would be another sign of the regulator’s increasing engagement with crypto-market infrastructure. Bottom line: With Congress gridlocked on comprehensive crypto legislation, the SEC is using its rulemaking powers to push incremental, targeted updates that could materially affect how institutional players hold and trade digital assets. Read more AI-generated news on: undefined/news