Andreessen Horowitz (a16z) has made a formal request to the U.S. Securities and Exchange Commission (SEC) urging the commission to modify its guidelines regarding crypto custody. This request aims to push for regulatory modifications which will enable Registered Investment Advisers (RIAs) to hold crypto assets directly, but under certain conditions. According to reports, a16z submitted the formal letter to the SEC Crypto Task Force in April. 9, 2025.
Venture Capital A16z believes that the existing regulatory rules are mismatched with cryptocurrency realities. A principles-based regulatory framework is thus crucial according to the firm’s current statement. Furthermore, a16z believes that all regulatory standards dealing with blockchain assets must recognize the two distinctive features involving private key security and on-chain governance.
RIAs Face Outdated Digital Assets’ Custody Rules; a16z Claims
The Investment Advisers Act of 1940 mandates that RIAs follow three necessary regulatory rules. These include strict adherence to custody, disclosure regulations and record keeping protocols. Such rules originated to manage traditional financial systems. The recent a16z letter to SEC points out that current regulatory standards lack effective provisions to address crypto asset risks and specific features.
The firm advocated for new custody rules which should depend on protection levels instead of applying to specific custody entities. A16z further emphasizes that RIAs experience difficulties in finding third-party custody providers capable of delivering staking, protocol voting and yield features. These features are important for blockchain platforms as they play an essential role in the performance of digital assets.
“We submitted our response to the SEC’s request for information about IA custody. We’re excited to see the SEC take steps towards offering guidance for crypto. Advisory clients deserve for their assets to be safeguarded, so we welcome concrete advice from the Commission,” Scott Walker, the CCO at a16z confirmed on X.
The venture capital further explained that RIAs face a problematic situation due to the absence of definite SEC guidelines. Without a proper regulatory framework, advisers struggle to defend clients’ asset ownership while adhering to regulatory standards.
A16z Proposed Five Key Principles for Custody Reform
As part of the official letter to SEC, a16z proposed five principles that could modernize crypto custody regulations for RIAs. The five principles support both self-custody in restricted cases, acceptance of non-bank custodians and execution methods that optimize results.
According to a16z, RIAs should only hold crypto assets when third-party safeguarding solutions are unavailable. With these arrangements custodians have to maintain official audit procedures as well as segregated and disclosed control systems.
“We also recommend self-custodying as an avenue for RIAs who can meet the substantive protections, when third-party custodial solutions that meet these substantive protections are not available or do not support economic and governance rights,” an a16z blog post read.
Furthermore, self-custody for RIAs could enable them to provide asset functionalities that third-party custodians might not support. These include features such as staking and voting capabilities.
The second principle urges the SEC to recognize any custodian with safeguarding-standard. This includes even state-chartered trust companies. The vital standards include segregation of assets, encryption of key storage, having clear recovery procedures and frequent performance of financial audits.
a16z also requested the SEC to allow advisers to transfer assets provisionally as they try to achieve optimal execution. This means that when an RIA moves tokens to a trading platform, it will not count as violation of custody. By implementing this measure, advisers can identify optimal prices which comply with SEC regulations.
Industry Shifts Support Regulatory Updates on Crypto Custody
The SEC’s move to evaluate updating custody rules comes at a crucial moment as the traditional financial system is changing. Notably, in 2024 the agency substituted SAB 121 with Staff Accounting Bulletin (SAB) No. 122. The new bulletin introduced more flexible criteria that enabled banks to hold crypto as a form of custodial asset.
Furthermore, the federal government issued an order during the previous month that permitted U.S. banking institutions to deliver stablecoin and custody service without seeking prior authorization. This marks a shift toward using crypto within the regulated finance sector.
But still, risk management remains a primary concern. The Office of the Comptroller of the Currency (OCC) demands effective control measures from banks that provide digital asset custody services. “The OCC expects banks to have the same strong risk management controls in place to support novel bank activities as they do for traditional ones,” the acting Comptroller of the Currency – Rodney E. Hood, remarked in a recent press release.
A Push For Responsible Regulatory Frameworks
The proposal by a16z matches SEC’s desire to implement proper crypto regulatory measures. In fact, the then-Acting SEC Chair Mark Uyeda declared that the letter by the venture capital came just a day after the SEC considered revising the $100M threshold for RIA registration. Despite Paul Atkins being the one in charge now, Uyeda’s comments mark a move towards regulatory reform in the crypto sector.
RIAs will thus require definitive regulatory guidance as digital assets continue to become more popular. A16z’s proposal presents guidelines that could pave the way towards reformed Custody Rule for the cryptocurrencies. The proposed framework creates conditions to fundamentally alter current methods through which investment advisers can protect and handle crypto assets within U.S borders.
