TREE NEWS update: A self-custody proposal would require registered investment advisers to sign written agreements with clients stating that adviser-self-custodied crypto assets are treated as financial assets under Article 8 of the Uniform Commercial Code. The measure focuses on bankruptcy protection and is aimed at reducing the risk that clients lose crypto assets if an adviser becomes insolvent.
Self-Custody Proposal Would Require RIAs to Clarify Crypto Bankruptcy Protection
This targets a legal grey zone that has quietly shaped crypto custody risk: whether client assets held by an adviser qualify as financial assets under Article 8, which determines if they are protected from the adviser's estate in insolvency. RIAs offering self-custody have often relied on disclosure language rather than explicit contractual clarity, leaving clients exposed in a failure. The significance is procedural rather than market-moving — it shifts the burden onto written client agreements. Whether the proposal advances, and how advisers with existing self-custody arrangements adapt their documentation, is the open question.
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