Svmuu News: Galaxy posted on X, noting that many Registered Investment Advisors (RIAs) are struggling to meet their clients’ demand to allocate funds to DeFi while complying with the U.S. SEC’s Custody Rule. Current regulations require client assets to be held by a Qualified Custodian (QC), effectively ruling out self-custody and making it difficult for traditional financial accounts to directly participate in DeFi strategies.
In practice, however, the costs associated with ensuring technical compatibility and regulatory alignment between custodians and new public blockchains, tokens, and DeFi protocols are high, and most custodians lack the capability to support DeFi interactions, resulting in a persistent “compliance infrastructure gap.” At the same time, fiduciary duties require that RIAs cannot simply disregard clients’ demand for DeFi exposure, creating a structural conflict for institutions between compliance requirements and investment objectives.
Galaxy believes that a potential solution for the future lies in establishing a principles-based regulatory framework that includes MPC key management, governance controls, third-party audits, on-chain transparency, and rigorous protocol due diligence mechanisms—all designed to unlock on-chain asset allocation capabilities without compromising regulatory objectives.