Tag: Regulation & Policy

  • Brazil Election Looms, Potential for Cryptocurrency Policy Shifts

    Brazil Election Looms, Potential for Cryptocurrency Policy Shifts

    Brazil’s upcoming presidential election introduces uncertainty regarding the future direction of the country’s cryptocurrency policies. As a global leader in crypto adoption, any shifts in policy following the election could significantly impact its market and users.

    The approaching electoral contest places a spotlight on the potential for changes in Brazil’s approach to cryptocurrencies. Depending on the outcome between President Lula and contender Flavio Bolsonaro, the nation’s crypto policies could evolve, though the specific directions each candidate might pursue remain uncertain.

    Brazil’s current standing as a top nation in cryptocurrency adoption underscores the significance of these potential policy adjustments. This high level of engagement means that electoral results could have a notable influence on the crypto landscape and its participants.

    While the election signals a period of potential evolution for Brazil’s crypto sector, definitive outcomes are yet to be determined. The specific cryptocurrency policies each candidate might enact, and the precise impact on Brazil’s adoption ranking, are currently unknown. Readers should monitor post-election developments for clarity on these evolving matters.

    Broader Context

    Source materials place the factual news in this context: Brazil is ranked as the number one in crypto adoption.

  • ICBA Sues OCC Over Crypto Bank Charters, Citing Regulatory Concerns

    ICBA Sues OCC Over Crypto Bank Charters, Citing Regulatory Concerns

    The Independent Community Bankers of America (ICBA) has filed a lawsuit against the Office of the Comptroller of the Currency (OCC) in the US District Court for the District of Columbia. The lawsuit challenges the OCC’s rules and an interpretive letter that permit cryptocurrency-focused firms to obtain national trust bank charters. The ICBA alleges that these rules allow crypto companies to gain federal bank charter credibility without adhering to the same regulatory requirements as traditional banks, such as FDIC insurance and Community Reinvestment Act (CRA) obligations.

    The core of the ICBA’s argument, according to the lawsuit, is that Congress never intended the national trust charter to serve as a “side door” for crypto firms to receive the benefits of federal banking supervision while potentially avoiding established regulatory frameworks. The ICBA argues that the OCC’s actions may be creating a pathway for digital asset firms to benefit from federal banking oversight without being regulated in the same manner as insured depository institutions.

    This legal challenge comes at a time when several crypto-focused firms have recently secured final approval for their own federally supervised trust bank charters. Notably, Circle received authorization to establish First National Digital Currency Bank, N.A. (Circle National Trust), and Ripple previously secured approval to establish Ripple National Trust Bank. BitGo and Paxos have also been involved in the OCC’s process for approving such charters.

    The OCC’s final rule, published in March 2026, clarified that national banks limited to trust-company operations could also conduct related non-fiduciary activities. The regulator noted at the time that the rule neither expanded nor contracted its existing chartering authority. However, the ICBA contends that this framework, coupled with the interpretive letter, facilitates a regulatory disparity.

    The lawsuit seeks to invalidate the OCC’s final rule and the related interpretive letter. The outcome of this legal action remains uncertain and could have significant implications for the growing number of digital asset entities pursuing similar federal banking licenses. The ICBA’s challenge highlights ongoing tensions between traditional banking groups and the evolving digital asset sector regarding regulatory oversight and market access.

    This development introduces regulatory uncertainty into the crypto banking sector, as traditional banking groups actively oppose regulatory pathways for crypto firms seeking federal charters. The ICBA’s concerns center on the potential for these firms to avoid FDIC insurance, CRA obligations, and the capital and liquidity frameworks applicable to insured institutions. The full implications for the broader digital asset industry and the future of federal banking charters for crypto firms are yet to be determined.

    Broader Context

    Source materials place the factual news in this context: This comes just as a few of those companies secured final approval for their own federally supervised trust bank charters and could have broader implications for the growing number of digital asset entities pursuing similar licenses.

  • Kalshi Faces Legal Uncertainty Amidst Conflicting Federal Rulings on Event Contracts

    Kalshi Faces Legal Uncertainty Amidst Conflicting Federal Rulings on Event Contracts

    Kalshi, a platform offering event contracts, is navigating a complex legal landscape as various states, tribal nations, and consumers challenge the classification of its offerings. Conflicting rulings from federal circuit courts have created significant uncertainty regarding the platform’s operational future and the regulatory framework governing its contracts.

    At the heart of the dispute is Kalshi’s assertion that its event contracts are financial swaps, subject to regulation by the Commodity Futures Trading Commission (CFTC). However, states and other entities contend that these contracts function as sports wagers, falling under state gambling laws. This fundamental disagreement has coincided with a series of legal battles, with federal circuit courts issuing divergent opinions on whether federal commodities law preempts state gambling regulations.

    Recent court decisions have highlighted this division. On August 28, 2026, the Ninth Circuit ruled against Kalshi in a case involving Nevada. This was followed by the Sixth Circuit’s rejection of Kalshi’s appeal on September 28, 2026, which cleared the path for Ohio and Tennessee to pursue enforcement actions against the platform. In contrast, the Third Circuit had previously sided with Kalshi on the issue of preemption in a dispute concerning New Jersey. Separately, Montana and Kalshi mutually dismissed their lawsuits on September 17, 2026, temporarily pausing enforcement in that jurisdiction.

    The legal uncertainty extends beyond state enforcement. Kalshi is also facing claims from tribal gaming entities and consumer class actions, further complicating its operational environment. The differing outcomes across federal circuits mean that Kalshi’s ability to operate may vary depending on the geographic location of its users, a situation that could persist until the conflict is resolved, potentially by the Supreme Court.

    This regulatory ambiguity occurs against a backdrop of significant growth in the sports wagering market. In 2025, Americans wagered approximately $166 billion on sports bets, with legal sportsbooks handling $166.94 billion, generating $16.96 billion in revenue and $3.71 billion in state taxes. A notable trend reported by Fortune indicates that 35% of bettors are using traditional sportsbooks less, with many shifting their wagers to prediction markets like Kalshi. This migration of funds to platforms not classified as traditional gambling presents a competitive challenge to established sportsbooks and reduces potential tax revenue for state governments.

    The core legal question revolves around preemption: whether federal commodities law supersedes state gambling laws when applied to Kalshi’s event contracts. The current circuit split underscores the complexity of this issue, creating a fragmented regulatory landscape. Until a definitive resolution is reached, the classification of Kalshi’s contracts and its operational scope remain uncertain, with potential implications for both the platform and the broader market for event-based contracts.

    Why This Matters

    The core legal question is whether federal commodities law preempts state gambling laws when applied to Kalshi’s event contracts. The conflicting circuit court rulings create a fragmented regulatory landscape for Kalshi’s operations across different states, with the ultimate classification of Kalshi’s event contracts (swaps vs. gambling) remaining uncertain until a definitive resolution is reached, potentially by the Supreme Court.

    Broader Context

    Americans spent more on sports bets in 2025 than on movies, music, and museums combined, with a growing share of that action flowing to platforms that do not classify themselves as traditional sportsbooks.

  • ICBA Challenges OCC’s Crypto Trust Bank Licenses in Federal Court

    ICBA Challenges OCC’s Crypto Trust Bank Licenses in Federal Court

    The Independent Community Bankers of America (ICBA) has filed a lawsuit against the Office of the Comptroller of the Currency (OCC), alleging the agency has exceeded its legal authority by issuing national trust bank licenses to cryptocurrency companies. The suit, filed in federal court on Friday, contends that these licenses allow crypto firms to enter the U.S. banking system without adhering to the same stringent capital, liquidity, and oversight requirements as traditional community banks.

    The ICBA argues this creates a significant and unfair competitive disadvantage for smaller banks. According to the lawsuit, these cryptocurrency companies do not need to be insured by the Federal Deposit Insurance Corporation (FDIC), unlike their community bank counterparts. The ICBA claims Congress did not intend for the national trust bank charter to serve as a pathway for crypto companies seeking federal banking credibility, characterizing the OCC’s actions as “regulatory arbitrage, not regulatory innovation.”

    Past OCC actions have included granting trust bank licenses to firms such as Protego, Erebor, Coinbase, Circle, and Crypto.com. More recently, World Liberty Financial, a company with ties to Donald Trump’s family, received a license, drawing criticism from Senator Elizabeth Warren. The OCC has stated that it “does not comment on litigation” when asked about the lawsuit.

    The ICBA’s concerns extend to what they perceive as crypto companies exploiting regulatory loopholes, such as stablecoin bills or trust bank licenses, to engage in core banking activities with reduced compliance costs. This legal challenge could have substantial implications for the crypto industry’s integration into traditional finance. If the court sides with the ICBA, the OCC might be compelled to revoke or halt the issuance of such licenses, potentially narrowing the path for crypto firms seeking banking privileges. Conversely, if the OCC prevails, it could accelerate the integration of crypto and traditional banking by providing crypto companies with more legal avenues to obtain banking status.

    The OCC, on the other hand, reportedly views these license approvals as a “revival of new bank naming after a long drought.” This situation highlights a fundamental conflict between financial innovation and regulatory fairness, with the ICBA advocating for the latter.

    This lawsuit follows other recent developments in the financial regulatory space, including the Commodity Futures Trading Commission (CFTC) allowing futures companies to invest in tokenized real-world assets and Stripe launching a new stablecoin, OUSD. The ICBA had previously expressed concerns about stablecoins potentially competing with the core deposit business of traditional banks, as highlighted in their stance on the CLARITY Act.

    Key uncertainties surrounding this case include the ultimate outcome of the lawsuit, whether the OCC will continue issuing licenses while the legal proceedings are ongoing, the specific business models of the crypto companies that have received licenses, and the precise level of regulatory oversight applied to these crypto-focused trust banks.

    Broader Context

    Source materials place the factual news in this context: The article mentions previous related news: CFTC giving a green light for futures companies to invest in RWA tokenized assets, and Stripe issuing a new stablecoin OUSD.

  • SEC Greenlights Leveraged Bitcoin, Ether ETPs; Trading Delayed

    SEC Greenlights Leveraged Bitcoin, Ether ETPs; Trading Delayed

    SEC Greenlights Triple-Leveraged Crypto and Commodity ETPs

    The U.S. Securities and Exchange Commission (SEC) has approved a rule change paving the way for six new 3x leveraged exchange-traded products (ETPs) to be listed and traded, including those tied to Bitcoin and Ether. The decision, made on October 2, 2026, also covers similar leveraged products for gold, silver, crude oil, and natural gas.

    Volatility Shares Trust to Offer New Products

    The approved rule change, designated as Release No. 34-106577, pertains to six products structured as series within the Volatility Shares (VS) Trust, sponsored by Volatility Shares LLC. The cryptocurrency-focused offerings are the 3x Bitcoin ETF and the 3x Ether ETF, while the remaining four will track gold, silver, crude oil, and natural gas.

    Daily Performance Target and Futures-Based Exposure

    Each of these ETPs is designed to deliver three times the daily performance of its respective underlying asset. Crucially, this leverage resets daily, a detail that significantly impacts long-term performance. The funds will not directly hold physical assets like Bitcoin, Ether, or crude oil. Instead, they will gain exposure through futures contracts, which are agreements to buy or sell an asset at a predetermined price on a future date.

    Regulatory Timeline and Next Steps

    The regulatory process for these products moved with notable speed. Cboe BZX Exchange submitted the proposed rule change on August 10, 2026, with the SEC publishing its notice on August 14. The approval followed on October 2. The rule change specifically addresses limitations on leveraged commodity-based trust shares, the regulatory classification under which these products fall.

    However, SEC approval of the listing rule does not equate to an immediate launch. Trading can only commence once a separate Form S-1 registration statement, filed under the Securities Act of 1933, becomes effective. The SEC’s approval order did not provide a specific timeline for this next crucial step.

    Understanding the Risks of Daily Reset and Futures

    The daily reset of leverage is a critical factor for potential investors. Because the 3x target is applied on a day-by-day basis, cumulative results over weeks or months can diverge significantly from the performance of the underlying asset, especially in volatile or choppy markets. The compounding effect of daily gains and losses can erode capital, even if the asset’s price ends up roughly where it started over a longer period.

    The use of futures contracts introduces another layer of complexity. As these contracts have expiration dates, the funds will need to continuously “roll” them into new contracts. The costs associated with this rolling process can also negatively impact overall performance over time.

    A New Era for Leveraged ETPs in the U.S.

    This approval marks the first time the U.S. has sanctioned triple-leveraged ETPs linked to Bitcoin and Ether, alongside traditional commodities in a single regulatory action. While leveraged exposure of this nature is available in international markets, this decision opens the door for U.S. investors.

    The inclusion of Bitcoin and Ether in the same approval as gold and crude oil may also signal a shift in how the SEC categorizes digital commodities.

    The next significant development to monitor will be the effectiveness of the Form S-1 registration statement, which will serve as the official green light for trading to begin.

  • OpenAI Taps Ex-White House Cyber Chief Thomas Lind for Risk Leadership

    OpenAI Taps Ex-White House Cyber Chief Thomas Lind for Risk Leadership

    OpenAI Taps Former White House Cyber Official for National Security Role

    OpenAI has appointed Thomas Lind, a former White House cyber official, to lead its cyber and strategic risk efforts within the company’s national security policy team.

    Lind joined OpenAI the week of October 2, 2026. Prior to his move, he played a key role in shaping the federal government’s approach to advanced AI systems, including those developed by OpenAI.

    His most recent government position was at the White House Office of the National Cyber Director (ONCD), where he served as head of policy and senior advisor from April 2025 to June 2026. During his tenure at ONCD, Lind focused on the intersection of AI policy and cybersecurity.

    According to research informing this report, Lind was instrumental in the development of an executive order issued on June 2, 2026, which established AI safety frameworks. This order introduced a voluntary review process for highly capable AI models, providing a formal government channel for developers to engage with, though participation is not mandatory.

    Lind departed ONCD in June 2026, citing a desire to spend more time with his family. His exit occurred amidst a wave of departures from tech policy roles following the issuance of the executive order.

    In a panel discussion in August 2026, Lind noted that AI-driven cyber tools have significantly reduced response times for policymakers.

    In his new capacity at OpenAI, Lind will oversee cyber and strategic risk, two domains where advanced AI presents novel challenges. His expertise is particularly relevant, given his prior experience in developing cybersecurity frameworks and strategies from a governmental perspective during a critical period for federal AI safety protocols.

    The timing of Lind’s hire is notable, coming just months after the June executive order that created a review pathway for advanced AI models. This move suggests OpenAI is prioritizing its national security credibility, with Lind’s background poised to bridge private sector work on model safety with federal initiatives.

    The research indicates that OpenAI may influence broader standards as federal safety protocols continue to evolve.

    Several aspects warrant attention moving forward. Firstly, OpenAI’s engagement with the voluntary review process for high-capability models established in June will be closely watched.

    Secondly, Lind’s perspective on the shrinking window for cyber decision-making, driven by AI, is expected to shape OpenAI’s public stances. As a builder of some of the most advanced AI tools, the company now has an internal voice who has publicly acknowledged the accelerating pace of cyber decision-making.

  • Kalshi, Coinbase Gain Partial Victory in Illinois Sports Contracts Case

    Kalshi, Coinbase Gain Partial Victory in Illinois Sports Contracts Case

    Landmark Ruling Favors Kalshi and Coinbase in Sports Contract Regulation Battle

    Kalshi and Coinbase have secured a significant victory in the ongoing dispute over regulatory authority for sports event contracts. On October 2, 2026, U.S. District Judge Martha M. Pacold in Illinois granted a partial preliminary injunction, ruling in favor of the two companies and the Commodity Futures Trading Commission (CFTC) against state officials.

    The ruling, however, comes with a caveat. While the judge determined that Illinois’s licensing requirements likely conflict with federal derivatives law, she left the state’s transaction fee regulations unresolved. The parties have been instructed to return to court with proposed terms for the injunction.

    At the heart of the legal challenge is the doctrine of preemption, which dictates that federal law supersedes state law when the two are in conflict. Judge Pacold concluded that certain Illinois licensing provisions, specifically those under 230 ILCS 45, appear to clash with the federal Commodity Exchange Act (CEA). The CEA governs swaps and other derivatives, placing them under the exclusive jurisdiction of the CFTC.

    The plaintiffs’ case hinges on the classification of Kalshi’s sports event contracts. If these contracts are deemed “swaps” under the CEA, they would fall under federal oversight, preempting state gambling laws. The court’s preliminary decision supports this argument, indicating a likelihood of success for the plaintiffs. It is important to note that a preliminary injunction is not a final judgment, but rather an indication of the court’s initial assessment.

    The issue of transaction fees remains open. The court has not yet decided whether Illinois can impose its transaction fee rules on these contracts and has requested further legal arguments on the matter.

    Parties Tasked with Defining Injunction Scope

    Both sides now face the task of proposing specific terms for the injunction. These terms will ultimately define the practical limitations placed on Illinois’s regulatory actions.

    Kalshi is already familiar with federal oversight, having been a CFTC-registered designated contract market (DCM) since November 2020. The company launched trading on sports event contracts in January 2025, allowing users to speculate on game outcomes. While state regulators view these as akin to sports betting, Kalshi classifies them as derivatives trading.

    Coinbase joined the partnership in December 2025, announcing it would provide its users access to Kalshi’s sports event contracts.

    The CFTC’s involvement as a co-plaintiff is a significant development, signaling the federal regulator’s assertion that these contracts fall squarely within its purview.

    Broader Regulatory Landscape and Future Implications

    This Illinois case is part of a larger, multi-state legal battle over the regulation of sports-related contracts. Courts have issued divergent opinions, creating uncertainty about whether these instruments fall under the jurisdiction of federal derivatives regulators or state gambling authorities.

    The unresolved transaction fee issue warrants close attention. Such fees directly impact the economic viability of trading platforms. Even if Illinois loses on licensing authority, retaining some control over fees could still influence profitability for operators within the state. The forthcoming legal briefs on this matter will be crucial.

    Similarly, the precise wording of the injunction terms will be critical. A narrowly tailored order might leave Illinois with avenues for regulatory action, whereas a broad injunction would more definitively clear the path for Kalshi and Coinbase customers in the state.

  • Google’s Manyika Urges Shared AI Regulation

    Google’s Manyika Urges Shared AI Regulation

    Google Executive Calls for Shared Responsibility in AI Regulation

    A senior executive at Google has articulated a nuanced view on artificial intelligence, emphasizing its inherent risks, the necessity of regulation, and the impossibility of assigning oversight to any single entity. This perspective is particularly noteworthy coming from a company at the forefront of developing some of the market’s most powerful AI models.

    James Manyika, Google’s senior vice president for research and technology, outlined his position in an interview broadcast on October 2, 2026. His core argument posited that every stakeholder involved with AI bears a portion of the responsibility for its safety.

    “AI’s risks are real, regulation is necessary, and responsibility has to be shared across industry, government, and society,” Manyika stated.

    He clearly delineated accountability, asserting that companies developing “frontier AI models”—the most advanced and capable systems—should be primarily responsible for ensuring their safety.

    However, Manyika extended this responsibility beyond the research labs, arguing that those who deploy AI, its users, and policymakers all have crucial roles to play.

    Manyika also challenged the notion that the industry should solely await government directives. He suggested that waiting for President Trump to establish AI regulations would be impractical and advocated for voluntary industry initiatives to proceed in parallel with any eventual governmental frameworks.

    These remarks emerge as the AI sector increasingly embraces self-regulation. Prominent technology firms, including Google, OpenAI, and Nvidia, recently committed to a voluntary accord designed to enhance safety protocols.

    The agreement emphasizes the implementation of “robust internal processes” coupled with independent auditing by its signatories.

    The significant limitation of this accord, however, is its lack of legally binding enforcement mechanisms. Should a company fail to meet its commitments, there is no regulatory body empowered to impose penalties.

    Throughout 2025 and 2026, Manyika has consistently argued that AI is too critical to be left entirely unregulated, yet also too important to be subjected to poorly conceived regulations.

    His preferred approach favors balanced and enabling regulatory frameworks—rules designed to mitigate genuine harms without stifling beneficial advancements. He has highlighted sectors such as healthcare and infrastructure as areas where AI holds the potential for substantial positive impact.

    Manyika also co-directs the recently established DeepMind Institute, positioning him at the intersection of Google’s AI research and policy endeavors.

    For the AI industry, Manyika’s statements suggest a desire among leading companies to be perceived as proactive on safety issues rather than merely reactive.

    Critics of self-regulation are likely to focus on the absence of enforcement. While a voluntary accord with independent audits represents a step forward, accountability without legal recourse ultimately hinges on corporate integrity and reputational concerns.

    A key development to monitor will be whether this voluntary approach eventually solidifies into enforceable standards, and who will be instrumental in drafting them. If companies establish the initial benchmarks, governments may find themselves formalizing rules that the industry itself has already formulated.

  • SEC Proposes Crypto Custody Rule Changes, Potentially Allowing Advisor Self-Custody and State Trust Company Roles

    SEC Proposes Crypto Custody Rule Changes, Potentially Allowing Advisor Self-Custody and State Trust Company Roles

    The U.S. Securities and Exchange Commission (SEC) has proposed new rules that could significantly alter the landscape of cryptocurrency custody for investment advisors and state trust companies. Unveiled on Thursday, the proposal aims to address the long-standing challenge of finding qualified custodians for digital assets, potentially allowing investment advisors to self-custody client crypto assets under specific conditions and permitting state trust companies to serve as custodians.

    According to the SEC, this move is a response to market realities and a step toward providing greater clarity in the evolving digital asset space. SEC Chairman Paul Atkins stated that the crypto asset market has grown substantially, and existing regulations have not kept pace. The proposal, according to the SEC, seeks to balance easing access to digital assets with maintaining necessary safeguards for investors.

    Key to the proposal is the allowance for investment advisors to self-custody client crypto assets if they cannot find a qualified custodian. However, this option comes with strict conditions. Advisors must first suggest that no qualified custodian is available and must re-evaluate this quarterly. If a qualified custodian becomes available, the assets must be transferred promptly. Furthermore, self-custody requires robust private key protection mechanisms, comprehensive cybersecurity measures, and the isolation of each client’s assets. Any transfer of self-custodied crypto assets would necessitate approval from at least two authorized personnel.

    Additionally, the proposal would permit state trust companies to act as cryptocurrency custodians. To do so, these companies must obtain state authorization for crypto custody, establish procedures to prevent asset loss or theft, provide audited financial statements and internal control reports, and ensure client assets are segregated from their own.

    This initiative follows legislative efforts, such as the CLARITY Act, which have stalled in the Senate. The SEC appears to be pursuing regulatory changes through administrative rulemaking. This shift to administrative action is viewed by some in the industry, such as Bitwise, as potentially leading to faster regulatory developments without the limitations of broader legislative frameworks.

    SEC Commissioner Hester Peirce noted the challenges financial advisors have faced due to regulatory uncertainty in custody. The SEC’s proposal attempts to bridge this ‘custody gap,’ shifting the issue from a regulatory hurdle to a market-based challenge.

    However, the proposal is not without uncertainties. The strict conditions for self-custody may suggest costly or burdensome, potentially limiting its practical application to larger institutions. It remains to be seen how many investment advisors will opt for self-custody and how many state trust companies will invest in the necessary infrastructure and compliance. The SEC has opened the proposal for a 60-day public comment period, during which industry participants and the public can provide feedback. The final impact will depend on the SEC’s subsequent enforcement standards and the market’s reaction.

    SEC Commissioner Mark Uyeda acknowledged potential conflicts of interest in advisor self-custody but emphasized that advisors’ fiduciary duties to clients remain fully applicable. The proposal also includes provisions for regulated funds to entrust their crypto assets to investment advisors under specific conditions, provided the fund’s board oversees the arrangement.

    This development occurs alongside other regulatory actions. In recent weeks, the SEC has issued guidance on crypto assets, and the Commodity Futures Trading Commission (CFTC) has submitted its own crypto market regulation proposal to the White House. The SEC’s proposal to relax custody rules is a significant signal for the institutionalization of crypto assets, though its ultimate effectiveness will hinge on market adoption and the clarity of future SEC enforcement.

    Why This Matters

    The materials describe a narrow update: The SEC proposed to relax rules regarding cryptocurrency custody, allowing investment advisors to self-custody client crypto assets when qualified custodians are unavailable and permitting state trust companies to act as custodians. The extent to which investment advisors will be willing to self-custody assets given the strict conditions.

    Broader Context

    Source materials place the factual news in this context: SEC 鬆綁加密託管規則!顧問可自保管,州信託公司也能進場.

  • SEC Clears Custody Hurdle for Crypto Advisers

    SEC Clears Custody Hurdle for Crypto Advisers

    SEC Proposes Easing Crypto Custody Rules for Investment Advisers

    The U.S. Securities and Exchange Commission (SEC) has put forth a proposal aimed at simplifying the rules surrounding how investment advisers and funds hold cryptocurrency, potentially removing a significant regulatory obstacle that has hindered some firms from offering digital asset investments to their clients.

    The proposal, unveiled on Thursday, would permit investment advisers to hold clients’ crypto assets directly, under specific conditions, when no eligible third-party custodian is available. It would also broaden the scope of entities that can act as crypto custodians to include state-chartered trust companies.

    “The crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace,” stated SEC Chair Paul Atkins in a release.

    The initiative addresses a practical challenge in crypto investing: investment advisers often struggle to find qualified custodians for specific digital tokens, thereby limiting the investment options they can present to clients. The Chamber of Digital Commerce has previously voiced concerns regarding the scarcity of qualified crypto custodians. In a May 2025 submission to the SEC, the organization noted that some advisers had either rejected token allocations or requested portfolio companies to hold them until custody solutions became available.

    SEC Commissioner Hester Peirce described the prevailing uncertainty as a regulatory “roller coaster,” remarking that advisers have been “gritting their teeth and holding on for dear life” while awaiting workable custody regulations.

    Under the SEC’s proposed framework, advisers wishing to self-custody client crypto would be required to demonstrate that no approved custodian exists for each specific asset and to re-evaluate this determination on a quarterly basis. Should a custodian become available, the assets would need to be transferred promptly.

    Self-custody would also necessitate robust safeguards for private keys, cybersecurity measures, and the clear segregation of each client’s holdings. Any transfer of self-custodied crypto assets would require approval from at least two authorized individuals.

    SEC Commissioner Mark Uyeda acknowledged that adviser custody presents “an inherent conflict of interest,” emphasizing that advisers’ fiduciary duties would remain in effect when they hold clients’ crypto assets.

    The proposal also suggests allowing regulated funds to maintain crypto assets in self-custody with their investment adviser, provided the adviser adheres to self-custody requirements and the fund’s board of directors oversees the arrangement.

    The use of state-chartered trust companies—financial institutions authorized by a U.S. state to manage assets on behalf of others—would be subject to distinct conditions. These include ensuring the trust company is authorized by the relevant state authority for crypto custody, possesses adequate procedures to protect crypto assets from loss, theft, or misappropriation, and provides audited financial statements and internal control reports. Client holdings must also be kept separate from the company’s own assets.

    The package further proposes modifications to audit, recordkeeping, and disclosure requirements. The SEC will accept public comments on the proposal for 60 days following its publication in the Federal Register.

    This latest proposal is part of a broader effort by the SEC and the Commodity Futures Trading Commission (CFTC) to establish clearer regulatory frameworks for crypto assets within their existing authorities, particularly after the CLARITY Act did not advance in the Senate last month. The CFTC has submitted its own crypto market proposal for White House review, while the SEC has recently opened avenues for trading tokenized stocks.