The SEC’s Division of Investment Management is seeking comment on the application of the Custody Rule to digital assets. The Custody Rule provides that it is a fraudulent, deceptive or manipulative act, practice or course of business for an investment adviser that is registered or required to be registered under the Investment Advisers Act to have “custody” of client funds or securities unless they are maintained in accordance with the requirements of the Custody Rule.

Areas in which the SEC is seeking comments include:

• What challenges do investment advisers face in complying with the Custody Rule with respect to digital assets? What considerations specific to the custody of digital assets should the staff evaluate when considering any amendments to the Custody Rule? For example, are there disclosures or records other than account statements that would similarly address the investor protection concerns underlying the Custody Rule’s requirement to deliver account statements?
• To what extent are investment advisers construing digital assets as “funds”, “securities”, or neither, for purposes of the Custody Rule? What considerations are advisers applying to reach this conclusion?
• To what extent are investment advisers including digital assets in calculating regulatory assets under management for purposes of meeting the thresholds for registering with the Commission? What considerations are included within this analysis?
• To what extent do investment advisers use state chartered trust companies or foreign financial institutions to custody digital assets? Have these investment advisers experienced similarities/differences in custodial practices of such trust companies as compared to those of banks/broker-dealers?