In brief
- The SEC proposed on Oct. 1 a custody framework that would let registered investment advisers and regulated funds hold crypto assets themselves when no permitted custodian is available.
- The plan would also let state trust companies act as custodians for client and fund crypto, after checks on their license, controls and audited accounts.
- Comments are open for 60 days after the 760-page proposing release is published in the Federal Register.
The U.S. Securities and Exchange Commission proposed new custody rules on Oct. 1 that would give registered investment advisers and regulated funds, meaning registered investment companies and business development companies, a set route for holding crypto assets. The headline change: an adviser could keep a client’s crypto in self-custody when no permitted custodian will hold that asset.
What problem the SEC says it is fixing
The custody rules under the Investment Advisers Act and the Investment Company Act require client and fund assets to sit with a permitted custodian, such as a bank or broker-dealer. The SEC’s fact sheet says such custodians may not be available for many tokens, especially newer ones, and that whether a state trust company counts as a “bank” has been a case-by-case legal question. Our guide to crypto regulation covers how these U.S. rules fit with the rest of the world.
“With newly developed crypto assets, custodial capabilities may lag an asset’s deployment by many months,” SEC Chairman Paul Atkins said in a statement.
The conditions for self-custody
Self-custody would not be a free pass. Under the proposal, an adviser would have to:
- confirm before taking custody, and every quarter after, that no permitted custodian is available for the asset;
- show and document safeguarding expertise, with private key management and sign-off on every transaction by at least two people;
- keep each client’s crypto at addresses that hold only that client’s assets;
- get an internal control report from an independent public accountant within six months, then yearly;
- send account statements at least quarterly and agree in writing to treat the assets as “financial assets” under state law.
For a fund, its board would also have to review the adviser’s “no custodian available” report every quarter and decide each year that the asset would get reasonable care.
State trust companies and other changes
Advisers and funds could also use state trust companies, provided they check each year that the company is authorized by its state banking regulator to hold crypto, review its latest audited accounts and internal control report, and confirm client crypto is kept apart from the company’s own assets. SEC staff gave similar comfort in a September 2025 no-action letter; the proposal would put it into the rules.
The package also rewrites older parts of the custody rule. It drops the requirement that the accountants who do custody checks be registered with the PCAOB, adds exceptions for discretionary trading authority and inadvertent custody, and would let records kept on a blockchain count for SEC recordkeeping under conditions.
It replaces the SEC’s 2023 “safeguarding” proposal under former Chair Gary Gensler, which the agency withdrew in June 2025. Atkins framed the new plan as part of a wider push that includes the Regulation Crypto Assets offering proposal from August and the recent innovation exemption for tokenized stock trading. Comments go to file S7-2026-35; the 60-day clock starts once the release appears in the Federal Register.
