Qualified Custodian

A US regulatory category, not a marketing term. Under the Investment Advisers Act custody rule, an adviser holding client assets must place them with a qualified custodian: a bank, a registered broker-dealer, a futures commission merchant, or certain foreign financial institutions. The requirement carries segregation, books and records, and periodic verification obligations.

Applying that framework to digital assets has been contested for years, because the rule was written for assets held in accounts at institutions rather than assets controlled by keys. The SEC's 2023 safeguarding proposal would have extended the rule to cover crypto explicitly and tightened what qualifies. The unresolved question underneath it is whether holding a key on a client's behalf constitutes custody in the sense the rule intends, and what possession or control means for an asset that has neither in the traditional sense.

For an allocator the practical consequence is that not every custodian marketed to institutions meets the definition, and using one that does not can put an adviser out of compliance regardless of how good the security is. Ask which specific entity holds the assets, under which charter, in which jurisdiction, and whether that entity is the same one whose brand is on the platform.