Qualified Custodian

A Qualified Custodian is a regulated financial institution legally permitted to hold digital assets on behalf of clients under securities law or MiCA-equivalent frameworks, meeting strict standards for segregation, operational controls, and investor protection.

Under SEC Rule 206(4)-2 and proposed Rule 233-1, Qualified Custodians must be banks, broker-dealers, or futures commission merchants maintaining possession or control of client assets. They must provide segregation of client assets from proprietary holdings, periodic account statements to clients, annual surprise audits by independent accountants, and controls preventing custody arrangements that allow advisers to reassign ownership without custodian involvement.

Expected EU equivalents define Qualified Custodians as licensed CASPs or credit institutions authorized under MiCA Article 70-75 and relevant EBA supervision. Qualified Custodian status requires meeting capital adequacy requirements, implementing robust cybersecurity and operational risk controls, maintaining insurance or equivalent protection for client assets, and submitting to ongoing regulatory supervision and examination. Investment advisers managing client crypto assets are generally required to use Qualified Custodians rather than self-custody or unregulated third-party arrangements, ensuring institutional-grade protections for investor holdings.