SEC Proposes Direct Crypto Custody Rules as Bitcoin Hits $86K

The U.S. Securities and Exchange Commission has proposed a sweeping regulatory framework that would allow registered investment advisers and funds to hold digital assets directly, marking a potential turning point for institutional crypto adoption. The 760-page proposal permits firms to maintain private keys internally when no qualified custodian is available and authorizes state-chartered trust companies to serve as custodians, with mandatory quarterly reviews to assess whether third-party custody options have emerged.

This regulatory shift coincides with Bitcoin climbing above $86,400, driven by broader macroeconomic tailwinds including falling oil prices and declining bond yields. Major cryptocurrencies rallied 3% to 4% in early trading, with Ethereum reaching $2,740 and Solana hitting $122. Spot Bitcoin ETFs recorded $103 million in net inflows on Thursday, though Ethereum and Solana funds experienced outflows of $55 million and $1.1 million respectively.

The SEC’s custody proposal addresses a longstanding barrier to institutional participation. Under current rules, many advisers face compliance challenges when holding crypto due to the lack of federally chartered custodians meeting specific regulatory standards. By creating a conditional pathway for self-custody and expanding eligible custodians to include state trust entities, the commission is effectively acknowledging the infrastructure gaps in digital asset servicing while establishing oversight mechanisms. The quarterly review requirement ensures firms cannot permanently bypass third-party custody once market infrastructure matures.

Institutional infrastructure continues developing alongside regulatory clarity. Fiserv launched its digital asset platform Thursday, beginning with Roughrider Coin issued by the state-owned Bank of North Dakota. Evernorth shareholders approved a Nasdaq listing set to close October 7, with trading commencing October 8 under ticker XRPN. The company will hold approximately 473 million XRP worth roughly $705 million, making it the largest publicly traded entity built exclusively around the Ripple-linked token. Tether also announced USDT will return to the Bitcoin network this month through Utexo, utilizing the RGB protocol to enable dollar and bitcoin holdings within a single wallet, with Lightning Network integration planned.

Market participants are simultaneously navigating security risks inherent to decentralized finance. NEAR Intents suffered a $3.8 million exploit Thursday targeting its cross-chain bridging layer, though the team patched the vulnerability within an hour and committed to full user reimbursement. On-chain investigator ZachXBT traced stolen funds to KuCoin, where they were converted to Bitcoin. Despite the breach, the incident demonstrated improved incident response compared to historical exploits that resulted in prolonged service disruptions or incomplete recoveries. NEAR token fell nearly 9% to $4.86 following the attack.

State-level tax policy remains fluid as Illinois agreed to delay implementation of its cryptocurrency tax by six months pending ongoing litigation. At the federal level, political engagement with digital assets continues evolving, with former President Donald Trump scheduled to host a November 22 dinner at his Virginia golf club for top holders of his associated memecoin, including tiered access based on token ownership.

Privacy-focused development persists despite regulatory scrutiny. The Ethereum Foundation launched zkAPI, a tool enabling private artificial intelligence interactions using zero-knowledge proofs. This release comes as privacy protocols gain traction; NEAR Intents had processed over $30 billion in swaps across 35 networks before the exploit, underscoring demand for confidential cross-chain transactions even amid security vulnerabilities.

Traditional finance integration accelerates as digital asset markets mature. Gold rose 0.3% to $4,220 per ounce while crude oil declined 4% to $89, creating favorable conditions for risk assets. Stock futures indicated positive opens for major indices, with Dow and Nasdaq contracts up 0.6% and 0.7% respectively. Altcoins showed mixed performance, with SKY gaining 17%, AAVE rising 11%, and ZRO advancing 12%, reflecting sector rotation rather than broad-based speculation.

The NFT market recorded a landmark transaction as the sole 7-Trait CryptoPunk sold for approximately $5.9 million through lending protocol Gondi, though complete sale terms remain undisclosed. Blue-chip collections showed stability, with CryptoPunks floor holding at 33 ETH and Bored Ape Yacht Club declining marginally to 6.18 ETH.