The SEC Sends Its Overhaul of Crypto Custody Rules to the White House Without Revealing the Content

A reform advancing in the dark. On August 25, the SEC submitted a rule proposal to the OIRA, the White House office responsible for reviewing federal regulatory projects, regarding how investment advisors can hold digital assets on behalf of their clients. The text itself remains confidential at this stage, and no one outside the regulator and the White House knows its exact content. Key points of this article:

• The SEC has submitted a rule proposal to the OIRA concerning the custody of digital assets by investment advisors, the content of which remains confidential.
• The project aims to clarify the procedures for holding cryptocurrencies and to replace outdated provisions while seeking a balance between innovation and client protection.

The project addresses a troubling gap for the entire industry. According to Bloomberg, the proposal is intended to clarify how advisors and investment firms can hold cryptocurrencies for their clients and to eliminate custody provisions deemed outdated by the SEC itself in light of the evolving digital markets.
This initiative follows the abandonment, under the Trump administration, of the stricter rule desired during the Gensler era. Proposed in February 2023 under the presidency of Gary Gensler, this text required advisors to sign a strict custody agreement with a qualified custodian, ensuring that cryptocurrencies would neither be lent nor pledged and would always be kept separate from the intermediary's own assets.
The SEC has had to navigate between two pitfalls. Too much rigidity stifles innovation, while too much laxity exposes clients. The crypto working group led by Commissioner Hester Peirce has been working for months on this balance.

The timeline remains unclear, and this is precisely what frustrates the sector. The White House office, known as OIRA, can request modifications before sending the text back to the SEC, which will then have to vote to publish it for public consultation. There is no guarantee that the final text will resemble what is currently circulating internally.
This file adds to an already long list of crypto initiatives launched by the administration this year, while the CLARITY Act, the law intended to allocate responsibilities between the SEC and CFTC regarding digital assets, remains stalled in the Senate since the summer break.
From the industry's perspective, the reception is generally favorable. Summer Mersinger, Executive Director of the Blockchain Association, praised, according to Cointelegraph, an initiative that finally brings the regulatory clarity that the sector has been demanding for years. This approval contrasts with the climate of distrust that recently prevailed between cryptocurrency issuers and their regulator.

The custody rule does not come out of nowhere. The SEC had already published on August 18 its proposal << Regulation Crypto Assets >>, a text of several hundred pages that for the first time sets written rules rather than case-by-case prosecutions, including two exemptions for fundraising up to $75 million for crypto projects.
Adding a custody reform to this initiative confirms a deliberate change in approach since the beginning of the year. Writing the rules before litigation, rather than discovering them in court afterward. The Senate, for its part, is moving at a completely different pace on the CLARITY Act, whose vote evaporated just before the summer break.

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