New SEC crypto rules threaten small advisers, but big firms win
The US Securities and Exchange Commissions proposed crypto custody fallback could broaden investment choices while making them easier for larger advisers to offer. The agencys economic analysis says the expense of safeguarding assets and arranging independent oversight may lead smaller firms to decline to offer the service. Approved on Oct. 1, the proposal would let advisers hold covered client crypto assets when an eligible custodian is unavailable, subject to safeguards. Table 8 models certain annual costs of $433,833 per adviser using that option. That estimate includes an independent control report but leaves out some potentially significant technology costs. For clients, the consequence could be that an asset might become available through an adviser with sufficient custody resources while remaining outside another advisers offering. SEC Commissioner Hester Peirce distinguished adviser “self-custody” from investors holding their own assets. Here, an intermediary would hold clients key materials, potentially including a non-controlling portion. Clients would still depend on that intermediarys safeguards. Related Person Hester Peirce Commissioner · U.S. SEC For ordinary advisory clients, the adviser amendments concern crypto assets that are funds or securities, while the relevant scope for regulated-fund accounts is securities or similar investments. What the annual estimate includes The largest modeled annual component is the independent internal control report. The
