The Qualified Custodian Standard mandates that investment advisors entrusting client assets to a third party must do so with a qualified custodian. A qualified custodian is typically a bank, a savings association, a broker-dealer, or a futures commission merchant meeting specific regulatory requirements for safeguarding assets. This standard aims to protect client funds and securities from misappropriation or loss. It ensures that client assets are held by regulated and financially sound entities.
Context
For digital assets, the application of the Qualified Custodian Standard has been a significant point of discussion, as traditional custodians may not possess the technological capabilities or regulatory permissions for digital asset storage. Debates center on whether certain digital asset service providers can meet the stringent requirements to be deemed qualified custodians. A critical future development involves regulatory clarifications and potential legislative changes to formally define qualified custodians for digital assets. News often reports on the SEC’s stance and industry efforts to comply with this standard for crypto holdings.
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