Bain Capital Crypto Among 5 Firms Bashing SEC’s Proposed Custody Rule

A collection of top crypto asset managers, including Dragonfly Digital and Electric Capital, are the latest to dissent to the SEC’s new proposed custody rules

article-image

AevanStock/Shutterstock modified by Blockworks

share

Objections to the SEC’s proposed shifts to the US regulator’s long standing custodial rules are mounting. 

In a joint letter this week, representatives from Bain Capital Crypto, Dragonfly Digital, Electric Capital, Haun Ventures and Ribbit Capital on Monday joined a growing number of dissenting industry voices to the SEC’s efforts to shift custodial regulations for registered investment advisers (RIAs). 

The five firms in the letter said they collectively “manage over $15 billion in assets, including crypto assets” on behalf of institutional investors. None of the five immediately returned a request for comment.

Top industry figures, including the crypto lobbyist Blockchain Association, have weighed in recently, too.

“The safeguarding of crypto assets is a vital concern for our industry, but it must be properly balanced against the real concern of stifling emergent technology and innovation,” the letter said. 

Read more: Blockchain Association Calls for Revisions to SEC Custody Rule

A great deal of crypto-native dispatches to the SEC of late have decried a lack of self-custodial options for digital assets under the new rules. 

Signed by top compliance and legal executives from their respective firms, the letter called into question the impact of the proposed rule changes on crypto traders — and, especially, their investors. 

The executives went as far as to say that, lacking appropriate crypto self-custody provisions, “investors lose out on an investment opportunity and the adviser is required to neglect its fiduciary duty to its investors.” 

The objections pertain to the SEC’s Rule 223-1, which remains open for public comment. It was first introduced by the regulator in February. 

Qualified custodians poised to control crypto for RIAs

One major and contentious piece of the SEC’s proposal would require qualified custodians, as defined by the federal regulator, to oversee the custody of a basket of assets beyond the scope of what’s currently required. 

If they take effect, the SEC’s new custodial rules would expand the requirements for asset safekeeping of client funds overseen by an RIA — even assets not currently regulated by the SEC as a security. 

The updated guidelines appear poised to require crypto asset managers, including venture firms with token investments, to tap a US-regulated, qualified custodian for their digital assets. 

In making the case for crypto self-custody to be permissible, at least in certain circumstances, the letter repeatedly drew on the idea that forcing crypto custody exclusively into the hands of third-party custodians would ratchet up custody fees and stifle related innovation. 

“For a qualified custodian to support a particular crypto asset requires a large upfront investment of operational resources,” the letter said. “This is ultimately a business decision for the custodian as to whether to support a particular asset. Therefore, during the period when a custodian is unable to take custody of crypto assets, advisers have to rely on self-custody.” 

The proposal also objected to the SEC’s proposal to make state-chartered crypto custodians gain FDIC approval in order to operate.  

There have been “many safeguards that have been developed to self-custody crypto assets,” the letter said. 

And the representatives in the letter said that they agree with the SEC that “an overhaul of the entire framework is advisable.” 

Ideally, if certain crypto-friendly provisions are added in. 

“Investment advisers need a unified and consistent framework for the custody of client assets of all types in order to provide investors with professional investment management services,” the letter said. 

It gave a few industry examples, including multi-signature wallets and cold storage kept on-location by a crypto investment firm. 

And crypto asset managers should be subject to an outside audit of their investment activities and operations, at least on an annual basis, it said.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 24 - 26, 2026

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template (1).jpg

Research

As AI supercharges surveillance, privacy becomes a prerequisite and the winning stack will combine confidentiality with selective disclosure. Zcash’s Tachyon, composable standards on Ethereum/Solana, and compliance-aware pools aim to make private rails the new norm.

article-image

Pipe’s testnet has delivered 60+ PB of data across ~290,000 Point of Presence (PoP) nodes

article-image

375ai will hold TGE at the end of the month, CEO Harry Dewhirst told Blockworks

article-image

Block’s subsidiary adds direct Bitcoin integration and AI-powered ordering tools for small businesses seeking streamlined transactions

by Blockworks /
article-image

The deal integrates Dinero’s staking suite into Plume’s real-world asset platform as it gains SEC transfer agent status

by Blockworks /
article-image

The state’s decision opens staking access to New Yorkers, signaling a regulatory shift toward broader crypto participation

by Blockworks /
article-image

The startup says it aims to rival Stripe and Worldpay by using stablecoins to speed merchant settlements from days to seconds

by Blockworks /