SEC tightens custodial rules for digital assets

The Securities and Exchange Commission (SEC) has imposed tighter rules on the custody of clients’ assets in digital asset businesses to protect investors against misappropriation of assets as well as fraud.

The amended regulations serve as a follow-up to the SEC’s public hearing on draft regulations on Dec 3, 2021, as well as the SEC’s resolution to draw up amendments to the regulations for the custody of customers’ assets on Nov 4, 2021.

The new regulations have been effective since March 1. The transitional provisions allow digital asset operators a period of 3-6 months to develop necessary work systems in compliance with the governing regulations.

The revisions have three primary changes that will promote protection of digital asset investors, said the SEC.

First, digital asset operators are strictly prohibited from using a client’s assets, fiat money and…