U.S. Securities & Exchange Commission Commissioner Hester M. Peirce delivered a speech on crypto asset custody that framed robust custody arrangements as central to institutional confidence and argued that SEC custody requirements need to better accommodate blockchain-based assets and evolving settlement models. She highlighted the SEC Crypto Task Force’s work with market participants to clarify how existing custody rules apply in the crypto context and to develop more workable approaches for broker-dealers seeking to meet their obligations under the Customer Protection Rule. Peirce cited prior SEC actions that, in her view, constrained the availability of regulated crypto custody, including the Special Purpose Broker-Dealer framework, which she said proved virtually unusable, and Staff Accounting Bulletin 121, which she said made crypto custody commercially impracticable until reversed through SAB 122 in January 2025. She also pointed to the SEC’s abandonment of its 2023 safeguarding proposal and flagged areas where market participants have sought clarity, including who can serve as a qualified custodian for Investment Advisers Act purposes, the limited pool of technically capable custodians for certain crypto assets, heightened cyber risks, and the limits of proof-of-reserves and on-chain transparency as substitutes for effective internal controls. On next steps, she argued the SEC should pursue rulemaking toward a principles-based custody framework spanning broker-dealers, investment advisers, and investment companies, and consider updating rules governing permissible custodians. As interim measures, she pointed to staff clarifications that the SPBD framework is not the exclusive route to compliance with the Customer Protection Rule and suggested updating the ATS three-step letter to address firms using smart contracts in settlement for self-custodial trading platforms.
U.S. Securities & Exchange Commission 2025-09-30
U.S. Securities & Exchange Commission Commissioner Peirce calls for more workable crypto custody rules and clearer qualified custodian options
SEC Commissioner Hester M. Peirce stressed the need for SEC custody requirements to better accommodate blockchain assets, highlighting the SEC Crypto Task Force's efforts to clarify crypto custody rules. She criticized prior SEC actions, like the Special Purpose Broker-Dealer framework and Staff Accounting Bulletin 121, for limiting regulated crypto custody. Peirce advocated for a principles-based custody framework and interim measures to address compliance and smart contract use in self-custodial trading platforms.