SEC moves to loosen custody rules that have kept advisers out of crypto
The US Securities and Exchange Commission published a proposal on Thursday that could reshape how investment advisers and funds handle digital assets. The regulator wants to let advisers hold client crypto themselves when no eligible custodian is available, under certain conditions. The proposal would also allow state trust companies to act as crypto custodians, broadening the pool of qualified custodians beyond the narrow set of institutions that currently qualify.
The move matters because custody requirements have been a persistent barrier for advisers. Under the existing framework, advisers who want to offer crypto exposure to clients have struggled to find custodians that satisfy the SEC’s standards, and that difficulty has discouraged some advisers from offering crypto investments at all. Cointelegraph, which first reported the day’s developments in its “Here’s what happened in crypto today” roundup, frames the proposal as potentially removing a major regulatory hurdle standing between mainstream financial advisers and digital asset offerings.
The timing is notable. Custody has been one of the most contested corners of crypto policy for years, sitting at the intersection of investor protection, operational risk and the question of whether digital assets can be safely held at scale by traditional financial infrastructure. Thursday’s proposal signals a willingness to adapt the rules rather than simply enforce them as written, at least on the custody question. For advisers who have watched the crypto market from the sidelines because compliance was too uncertain, the change could open a path in.
There are conditions attached. The self-custody allowance would apply only when no eligible custodian is available, meaning advisers cannot simply bypass qualified custodians by default. The proposal also stops short of a wholesale deregulation of custody. What it does do is acknowledge the practical reality that the eligible custodian pool has been too thin to support adviser demand, and it gives state trust companies, a category of institution with long experience in fiduciary custody, a clearer route into the digital asset market.
For more on how regulators are approaching digital assets, see our regulation coverage.
New York and Wyoming agree to coordinate oversight
The second major US development of the day came from the states. New York and Wyoming agreed to coordinate their oversight of crypto firms, covering licensing reviews, examinations and enforcement actions across both states.
That may sound technical, but the implications are significant for any firm operating in multiple US jurisdictions. New York, through its licensing regime, has long been one of the most demanding state regulators in the country. Wyoming has taken a different path, building a framework designed to attract crypto businesses, including chartering provisions for digital asset banks. The two states have, in effect, represented competing philosophies of crypto supervision.
An agreement between them to share licensing reviews, coordinate examinations and align enforcement actions suggests a move toward tighter cross-state coordination. For firms, that cuts both ways. On one hand, a more coordinated process could reduce the cost and friction of navigating multiple state regimes, since a licensing review in one state may inform the other. On the other hand, coordinated enforcement means a problem identified in one jurisdiction is more likely to follow a firm into the next, reducing the room for regulatory arbitrage between states.
The agreement also points to a broader trend in US crypto oversight: as federal agencies adjust their posture, states are not stepping back. They are building channels to work together. A firm that holds a licence in one state and operates in another should expect its examinations and any enforcement history to travel with it. Compliance teams at multi-state operators will need to treat state supervision as a connected system rather than a set of separate boxes.
European regulators scrutinise Binance over MiCA exemption
While the US moved to ease one constraint, Europe tightened another. European regulators were reported to be scrutinising Binance over its use of a MiCA exemption to keep serving some EU customers.
The detail matters because MiCA, the EU’s Markets in Crypto-Assets regulation, is the bloc’s comprehensive rulebook for digital assets. Exemptions within any rulebook are inevitably the areas where firms have the most room to operate outside the core framework, and regulators pay close attention to how those exemptions are used. The reported scrutiny of Binance centres on whether the exchange’s reliance on an exemption is consistent with the spirit and letter of the regime as it applies to users it continues to serve in the EU.
For Binance, the stakes are commercial as much as legal. The EU is one of the world’s largest crypto markets, and how the exchange can lawfully serve users there under MiCA shapes its European business. If regulators conclude the exemption has been stretched beyond its intended scope, the exchange could face pressure to change how it serves affected EU customers, or to bring those services fully within the MiCA framework.
The scrutiny also sends a signal to the wider industry. MiCA is still in its early implementation phase, and how regulators treat the first high-profile tests of its exemptions will set precedents for every other exchange operating in the bloc. Firms that have structured their European operations around similar carve-outs will be watching closely. A rulebook is only as strong as its enforcement, and the Binance review is an early indication that European regulators intend to examine how the exemptions they wrote are actually being used.
For broader context on the exchange sector, see our exchange news coverage.
What the day’s split-screen regulation means for the market
Taken together, the day’s developments present a split screen. In the United States, the SEC is proposing to make crypto custody easier for mainstream financial advisers, and two of the most consequential state regulators are coordinating rather than conflicting. In Europe, regulators are scrutinising the largest exchange’s use of an exemption under the bloc’s flagship crypto rulebook.
That combination, tightening oversight in some places while easing access in others, is not a contradiction. It is a picture of crypto regulation maturing on two fronts at once. The US moves suggest a recognition that if digital assets are to be integrated into adviser-led wealth management, the plumbing, starting with custody, has to work. The New York-Wyoming agreement suggests that even as access widens, supervision is becoming more joined up, not less. And the European scrutiny of Binance suggests that a comprehensive rulebook like MiCA will be actively policed, particularly at its edges.
For the market, the SEC proposal is arguably the most consequential item. Custody has been the choke point between institutional demand and crypto supply. Advisers control enormous pools of client capital, and the reason much of it has stayed out of crypto is not lack of interest but lack of a compliant path in. If the proposal survives the comment and adoption process, the pool of eligible custodians grows, and advisers gain a conditional fallback when no custodian exists, the practical barriers to adviser-led crypto offerings shrink. That is a structural change to the demand side of the market, not a headline-driven one.
The state coordination agreement matters for a different reason. It raises the compliance bar for multi-state operators in exchange for, potentially, a more predictable process. Firms should read it as a signal that state-level crypto supervision is here to stay and increasingly connected.
In Europe, the Binance review is a reminder that operating around the edges of a rulebook carries risk. MiCA was designed to bring order to the EU crypto market, and regulators appear willing to test how firms are using its flexibility provisions.
The day’s through-line, as Cointelegraph’s roundup of trends across Bitcoin, blockchain, DeFi, Web3 and crypto regulation suggests, is that the rules of engagement are being rewritten in real time. Custody rules, interstate supervision and EU compliance all shape which firms can safely and legally offer crypto services at scale. Thursday showed that process running in both directions at once: doors opening for advisers in the US, and doors being examined more closely in Europe. For firms and investors alike, the practical takeaway is that regulatory design, not just market price action, is now a primary driver of who can participate in this market and how.
Closing analysis
The SEC custody proposal is the development most likely to have lasting market impact, because it addresses the single most cited operational barrier between advisers and crypto. But proposals are not rules, and the conditions attached, particularly the requirement that self-custody only applies when no eligible custodian is available, mean the practical effect will depend on the final text and how the SEC defines eligibility. The New York-Wyoming agreement, by contrast, is effective coordination now, and firms should treat it as such. In Europe, the Binance scrutiny will be the test case for how MiCA’s exemptions are enforced. The pattern across all three is the same: regulators are no longer deciding whether crypto will be regulated, only how, and the answers are arriving faster than the market’s assumptions can adjust.
