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SEC proposed crypto custody fallback could push small advisers out

CryptoSlate reports the SEC’s economic model puts the annual adviser cost subtotal at $433,833, but the figure excludes potentially significant technology spending.

Reported · Written up by our desk · Regulation

The SEC’s proposed “crypto custody fallback” would allow certain advisers to hold covered client crypto assets when an eligible custodian is unavailable, with safeguards, CryptoSlate reports.

CryptoSlate says the SEC’s economic analysis models a $433,833 annual adviser cost subtotal using the fallback option, and that the estimate includes an independent control report but omits some potentially significant technology costs.

Because the SEC analysis suggests the safeguarding expense and the need for independent oversight could be too high for smaller firms, CryptoSlate reports the service may be declined by those advisers.

CryptoSlate also notes SEC Commissioner Hester Peirce’s distinction between adviser self custody and investors holding their own assets, emphasizing that the fallback involves an intermediary holding key materials and clients relying on that intermediary’s safeguards.

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