A draft proposal from US regulator the Securities and Exchange Commission, would make it more difficult for crypto firms to operate as "qualified custodians" for hedge funds private equity firms and other institutional investors, according to a report by Bloomberg.

A draft proposal from US regulator the Securities and Exchange Commission (SEC), would make it more difficult for crypto firms to operate as "qualified custodians" for hedge funds private equity firms and other institutional investors, according to a report by Bloomberg.

The report cites unnamed sources as revealing that the SEC will set out its new proposals on Wednesday, and while details are sketchy at present, the proposed rules will reportedly focus on "qualified custodians" – entities that are authorised to hold digital assets on behalf of clients.

A series of high-profile failures in the digital assets space during 2022, including the collapse of Sam Bankman-Fried's FTX crypto empire, and crypto broker Voyager Digital, have prompted regulators to increase scrutiny of the sector in a bid to reduce risks posed to the wider financial system.