The U.S. Securities and Exchange Commission has publicly acknowledged that its regulatory framework has fallen behind the growth of Bitcoin and the broader digital asset market, and is proposing new custody rules intended to close that gap, BeInCrypto reports.

The admission marks a notable rhetorical shift for an agency that has spent much of the past decade litigating crypto questions through enforcement rather than rulemaking. Commissioners and staff have repeatedly faced criticism from industry participants and sitting commissioners alike for relying on decades-old frameworks — chiefly the Securities Act of 1933 and the Securities Exchange Act of 1934 — to police assets and market structures those statutes never anticipated.

At the center of the proposal is custody. How digital assets are safeguarded, who may act as a qualified custodian, and what obligations follow from that status have become the sharpest points of friction between the SEC and the industry it oversees. The collapse of FTX in November 2022 hardened the agency's stance, and the failure of several crypto-friendly banks in 2023 removed custodial capacity that many firms had counted on.

The SEC's prior attempt to address the question — an expansion of the Custody Rule, rebranded as the Safeguarding Rule in a February 2023 proposal — drew sustained opposition. Critics argued the proposal would effectively force registered advisers to move client assets into qualified custodians, a category that excluded most crypto-native custodians and left few practical options for token holdings. The proposal also raised technical questions the agency struggled to answer cleanly, including how segregation and bankruptcy remoteness would work for on-chain assets.

The new proposals reported by BeInCrypto signal that the SEC intends to keep custody at the top of its agenda rather than abandon the effort. For asset managers, broker-dealers and trading platforms, the operational stakes are direct: custody requirements determine which counterparties they can use, how they segregate client assets, and how much capital they must tie up in compliance infrastructure. Any rule that narrows the qualified-custodian pool raises costs and can push activity toward unregulated venues or offshore jurisdictions.

The acknowledgment that regulation has lagged Bitcoin carries weight beyond the custody file. It aligns with a broader recalibration in Washington, where the SEC has scaled back several high-profile crypto enforcement actions and Congress has advanced stablecoin and market-structure legislation that would formally divide oversight between the SEC and the Commodity Futures Trading Commission. A commission that once treated most tokens as securities is now operating in an environment where that presumption is under statutory, judicial and political pressure.

For crypto-native firms, the practical question is whether the revised custody framework accommodates the technical realities of blockchain assets: key management, on-chain settlement, staking and the treatment of assets held in smart contracts rather than in traditional accounts. Prior drafts drew industry objections precisely because they imported assumptions from securities settlement that map poorly onto token standards and self-custodial architectures.

Institutional adoption also hangs on the outcome. Pension funds, advisers and registered investment companies have cited custody uncertainty as a primary barrier to Bitcoin and Ether allocations. A workable qualified-custodian regime would remove one of the remaining structural obstacles to broader institutional participation in U.S. crypto markets.

The specifics of the new proposal — its effective dates, its definition of qualified custodians and its treatment of existing arrangements — will determine whether this round fares better than the 2023 attempt. Market participants should expect a fresh public comment window once the proposal is published in the Federal Register, giving asset managers and custodians a formal channel to press for technical accommodations.