- SEC Commissioner Mark Uyeda proposes allowing state-chartered trust companies to serve as qualified custodians for Bitcoin and other crypto assets.
- Uyeda suggests revising the SEC’s special purpose broker-dealer framework to improve competition and expand crypto custody options for investors.
- Uyeda calls for clarity on the definition of “funds” under the Custody Rule, helping advisers better manage crypto assets without restrictions.
The SEC is considering a new approach for crypto custody. Commissioner Mark T. Uyeda suggested that state-chartered trust companies should be recognized as qualified custodians for Bitcoin and other crypto assets.
State-Chartered Trust Companies Could Compete in Crypto Custody
SEC Commissioner Mark Uyeda suggested that the agency enable state-chartered trust companies to hold crypto assets. He posited that national banks are already allowed to serve as fiduciaries for crypto according to the National Bank Act. State-chartered trust companies, regulated by authorities such as the New York State Department of Financial Services and the California Department of Financial Protection and Innovation, would also be qualified.
Uyeda clarified that state-licensed entities have competed historically with federally licensed banks. Identifying these trust companies as qualified custodians would carry on that tradition. He emphasized that these entities have fiduciary powers to a similar extent as national banks and that there is a solid foundation for their being brought under SEC custodial rules.
Revising Custody Frameworks to Boost Competition
Commissioner Uyeda also suggested that the SEC could strengthen competition by revising the “special purpose broker-dealer” framework. He proposed issuing interim guidance to clarify how firms can custody non-security crypto assets, crypto asset securities, and traditional securities. This guidance would help firms comply with capital and customer protection rules during the transition.
By eventually amending existing regulations, Uyeda believes more firms could enter the custody space, offering diverse and compliant options for digital asset investors. This move would provide more flexibility and innovation within the crypto custody market while preserving strong regulatory standards.
Need for Clear Definitions Under the Custody Rule
Uyeda raised concerns about prior SEC interpretations that classified most crypto assets as funds or securities. He warned that this broad categorization forced advisers to place all client crypto holdings into qualified custody, limiting investment choices.
In concurring with Commissioner Hester Peirce, Uyeda noted that numerous crypto assets are not securities. He also requested that the SEC make clear what crypto assets are ”funds” for the purposes of the Custody Rule. Clarification would enable the advisers to more easily navigate the custodial requirements without unduly burdensome limitations.
