The U.S. Securities and Exchange Commission (SEC) just proposed letting investment advisers and funds hold clients’ crypto themselves when no approved custodian exists, a move that would have been unthinkable two years ago. The 760-page proposal landed on October 1, two weeks after the Clarity Act, Congress’s big crypto market bill, failed in the Senate, so the SEC is now building crypto rules on its own. Here’s what the plan changes, what it means if a financial adviser or fund ever holds crypto for you, and why we think its biggest weakness has nothing to do with crypto at all. 

First, What Is “Custody” and Why Does It Matter?

Custody just means who actually holds your assets. With stocks, a big bank or brokerage keeps them…