The U.S. Securities and Exchange Commission (SEC) is shifting its attention to one of the most important—and contentious—issues in crypto regulation: custody. This Friday, the SEC will hold the second of its four-part roundtable series to address the most difficult issues in the digital asset space. This time, the spotlight is on how crypto assets are stored and who should be allowed to safeguard them.
The roundtable is part of the broader efforts by the SEC’s Crypto Task Force to modernize the regulatory playbook in an industry that’s evolving faster than most rules can keep up with. Senior SEC officials, top legal minds, and representatives from major crypto firms, including Fireblocks, Anchorage Digital Bank, Fidelity Digital Assets, Kraken, and BitG, are set to weigh in.
Newly appointed SEC Chairman Paul S. Atkins will open the session. Just days into his role, Atkins has already made waves by pledging to bring long-awaited clarity to crypto regulation.
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The Custody Conundrum
At the core of the discussion is a regulatory sticking point that has long frustrated crypto firms: custody compliance. Under current SEC rules, investment advisers must store client assets with a “qualified custodian”—traditionally a bank or a broker-dealer. But for crypto firms, that’s easier said than done.
Digital assets come with their own set of challenges—think private keys, hot and cold wallets, and around-the-clock trading. These don’t fit neatly into the traditional finance mold. While the SEC proposed updates to its custody rules in 2023, critics say the changes didn’t go far enough in addressing the unique needs of crypto-native firms.
Industry Voices Speak Out
Legal and industry experts have been vocal about the challenges. Neel Maitra, partner at Dechert LLP and one of the panelists, has called custody “the single greatest question facing crypto market participants.” He points to the delicate balancing act firms must perform: offering clients secure storage while ensuring ease of access.
Another panelist, Justin Browder of Simpson Thacher, slammed the SEC’s current approach last year, saying it puts advisers in a tough spot, forced to choose between regulatory compliance and serving their clients. “There are currently very few qualified custodians that are capable of providing solutions for crypto-assets,” he noted.
What to Expect
Friday’s event will feature two panels:
- “Custody Through Broker-Dealers and Beyond”
- “Investment Adviser and Investment Company Custody”
This follows the first session in the series, which took place on April 11 and focused on crypto trading. The remaining sessions will explore tokenization (May 12) and decentralized finance (June 6).
As the crypto industry continues to grow, how digital assets are stored—and who’s trusted to store them—could shape the future of investor protection and innovation alike. With regulators and industry leaders now sitting at the same table, this could be a key moment in defining the path forward.
