According to a Bloomberg report citing sources, tomorrow the SEC plans to publish a proposal to make it more difficult for crypto companies to assume the role of “qualified custodians.”

A 2013 SEC rule requires SEC-registered investment advisers to use qualified custodians, which include “banks, registered stockbrokers, futures commission dealers, or certain foreign entities.” Hedge funds, private equity firms, and pension funds may find custody more complicated.

Reports surfaced in January that the SEC was questioning investment advisers about the custody of digital assets.

Many crypto asset custodians are state-licensed trust companies. This includes Coinbase Custody Trust, Paxos Trust, and Fidelity Digital Assets, which are all New York State trust companies. Coinbase Custody Trust looks after crypto assets for BlackRock clients.

In 2020, the SEC launched an inquiry on the subject, which raised several questions specifically about whether state-chartered trust companies were qualified custodians.

For example, he asked: “How are the custodial services provided by state-chartered trust companies equivalent to those provided by banks, broker-dealers, and futures commission dealers? What is the difference between them? Would there be a gap?

There were a small number of responses. Unsurprisingly, Fidelity Digital Assets and Coinbase believe that state-authorized trusts are equivalent. Several respondents noted that the Advisors Act defines ‘banks’ as state-licensed trust companies.

Anchorage, the only federally chartered trust firm, had a slightly different turn. He believes that instead of just evaluating the escrow company, state regulators should be evaluated on a case-by-case basis because some are more specialists and have more experience on certain issues.

However, the SEC is not seen as particularly supportive of conventional custodians that engage in digital assets. It published an accounting rule that requires all digital assets held in escrow to be included on the balance sheet, which is not the norm for other assets. Many conventional custodians feared that the SEC rule combined with Basel banking rules meant they would have to reserve additional capital if they held digital assets in custody. However, in December the Basel Committee stated that this was not the case.

Meanwhile, the SEC issued a notice from Wells to Paxos alleging that the Binance USD (BUSD) stablecoin it issues is a security. NYDFS, the state regulator, has instructed Paxos to stop issuing BUSD.