SEC Eyes Updated Crypto Custody Rules: What's Changing?

SEC to Modernize Crypto Custody Guidance

The U.S. Securities and Exchange Commission (SEC) is actively reviewing and updating its guidance on digital asset custody, addressing how broker-dealers, asset managers, and investment advisors manage cryptocurrency transactions. This initiative, dubbed "Project Crypto," aims to modernize regulations to reflect the current digital landscape.

According to SEC Chair Paul Atkins, the agency is "mobilizing at the SEC all our different divisions and offices" to adjust rules, some of which are decades old. The goal is to implement recommendations and foster a more crypto-friendly environment in the U.S.

Key Objectives

• Secure Storage: Ensuring digital assets are stored securely, moving away from less secure methods like storing assets on flash drives.
• Clarity and Certainty: Providing clear regulatory guidelines to reduce uncertainty for participants in the crypto market.
• Legislative Alignment: Basing the SEC's work on existing legislation, such as the GENIUS Act, and ongoing market structure legislative efforts.

Real-Time Payments and Blockchain

Atkins also touched upon the potential for real-time or instant payment networks, potentially supported by blockchain technology. While acknowledging the benefits of instant settlements, he emphasized the need for built-in safeguards to address potential errors.

"The longer that it takes to have clearance on some of the transactions, the more risk there is in the system for something to go wrong, some black swan event," he stated, highlighting the importance of balancing speed with security.

For projects looking to ensure the security of their blockchain applications, especially when dealing with financial transactions, platforms like Codeum offer auditing and security consulting services to help mitigate risks.