TLDR
- SEC proposes a tailored crypto custody framework for investment advisers and regulated funds.
- Advisers could self-custody certain crypto assets when specified conditions are met.
- State trust companies could qualify to safeguard crypto assets for advisers and regulated funds.
- The proposal updates custody requirements under two major federal investment laws.
- Public comments will remain open for 60 days following Federal Register publication.
The U.S. Securities and Exchange Commission has proposed new rules governing how investment advisers and regulated funds can hold crypto assets. The plan would create a dedicated custody framework while updating requirements written primarily for traditional financial assets.
SEC Chairman Paul Atkins linked the proposal to the growth of crypto from a niche market into a major asset class. He argued that advisers need clearer options to safeguard digital assets while staying within federal securities laws.
SEC Proposal Opens a Path to Crypto Self-Custody
Under the proposal, registered investment advisers could self-custody crypto assets if they meet specified requirements. The framework would also cover registered investment companies and business development companies.
Atkins had previewed that approach in September because suitable third-party custodians remain unavailable for some digital assets. His earlier plan for adviser crypto self-custody also included a role for state trust companies.
The latest proposal turns those earlier policy remarks into formal rulemaking. It would amend requirements under the Investment Advisers Act of 1940 and the Investment Company Act of 1940.
The changes would also address financial statement audits for registered advisers and broker-dealer custody services used by regulated funds. The SEC has not adopted the framework, so the proposed provisions are not yet in effect.
State Trust Companies Could Expand Custody Options
The SEC would also permit advisers and regulated funds to use qualifying state trust companies for crypto custody. This could provide another option alongside banks and other permitted custodians.
The agency had already moved toward that model through 2025 staff guidance. That guidance provided conditional no-action relief involving certain state-chartered trust companies holding crypto assets.
The broader rulemaking has been developing for months. The SEC previously sent its crypto custody framework for White House review as work continued on a replacement for earlier custody proposals.
State trust custody has also drawn disagreement inside the Commission. Commissioner Caroline Crenshaw previously argued that state oversight can vary and may offer fewer safeguards than federal banking supervision.
The current effort follows an adviser custody proposal introduced under the SEC’s previous leadership that never became a final rule. The agency later revived its crypto custody rulemaking as part of its wider digital asset agenda.
Crypto Custody Joins Broader SEC Rulemaking
The custody plan arrives alongside other SEC work covering crypto offerings, tokenized securities, and market infrastructure. Atkins has presented those initiatives as connected parts of the agency’s approach to digital assets.
In August, the Commission proposed Regulation Crypto Assets, which would create tailored exemptions for some investment contracts involving digital assets. The SEC has also updated its approach to transfer agents as securities increasingly use blockchain-based records.
The new custody framework addresses how regulated firms hold crypto rather than determining whether particular tokens qualify as securities. Those classification questions remain subject to separate SEC interpretations and rules.
Public comments will remain open for 60 days after the custody proposal appears in the Federal Register. The Commission can revise the proposed requirements after reviewing feedback before considering whether to adopt final rules.
