The U.S. Securities and Exchange Commission has proposed new rules that would require crypto exchanges to follow stricter custody standards for client assets. The plan is aimed at reducing the risk of loss, misuse, or weak controls over customer funds held by trading platforms.

According to the proposal, exchanges would need to meet higher operational and compliance requirements when safeguarding digital assets. The SEC says the changes are intended to improve investor protection in a market that has faced repeated criticism over failures in custody, transparency, and oversight.

The move adds to Washington’s broader effort to tighten supervision of the crypto sector after a series of high-profile collapses and enforcement battles. Industry groups are expected to scrutinize the proposal closely, with some likely to argue that the new rules could raise costs and create additional barriers for firms operating in the market.

The SEC will now seek public comment before deciding whether to finalize the regulations. The outcome could shape how exchanges store and protect customer assets in one of the fastest-moving corners of the financial system.