The U.S. Securities and Exchange Commission has proposed a new framework for how registered investment advisers and regulated funds can hold crypto assets for clients.
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| The SEC has proposed a new framework for how registered investment advisers and regulated funds can custody crypto assets, including provisions for certain self-custody arrangements and state-chartered trust companies. |
Announced on October 1, 2026, the proposal would allow limited self-custody by advisers and let state trust companies act as custodians. It would also modernize custody rules the agency's chairman described as crafted for a bygone era. The SEC says the aim is to remove barriers that keep advisers from giving crypto-related advice and to give regulated funds access to a wider range of crypto strategies. The proposal is not yet final. It still has to go through public comment and a Commission vote, and the details will matter a great deal to asset managers, custodians and investors.
What the SEC Proposed
According to the SEC's press release (2026-100), the Commission proposed new rules and amendments that create a tailored custody framework for crypto assets. The framework covers registered investment advisers and regulated funds, meaning registered investment companies and business development companies.
The agency says the proposal would modernize its custody rules and expand investor choice. It would do this by removing regulatory barriers that inhibit an adviser's ability to provide crypto-related investment advice. It would also let regulated funds offer clients a wider range of crypto asset-related investment strategies.
Two features stand out. The proposal would permit crypto assets to be held in self-custody under certain circumstances. It would also allow state trust companies to serve as custodians for client and regulated fund crypto assets.
CoinDesk reported that the proposal runs to 760 pages. The SEC also proposed a separate measure, Regulation Crypto Asset, which addresses how companies can raise funds using digital assets without running afoul of federal securities rules.
Official Statement From the SEC Chairman
SEC Chairman Paul S. Atkins said in a statement that the proposal would give advisers and funds "a compliant pathway where none existed before." He added that it would replace the uncertainty created by custody rules written for an earlier era. The SEC also quoted him noting that crypto has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Those are the official positions of the agency's leadership. They are statements of intent, not findings of fact about how the rules will work in practice.
How Conditional Self-Custody Would Work
The most notable element is the adviser self-custody provision. Traditionally, advisers must keep client assets with a qualified custodian. Under the proposal, an adviser could hold crypto assets for clients, including the crypto assets of regulated funds, itself under limited circumstances.
Reporting from several outlets describes the conditions:
- The adviser must determine that no permitted custodian is available for the asset. CoinDesk noted this is likely to be an unusual circumstance once the rule is in place.
- The adviser must have certain expertise to hold crypto assets.
- According to Securities.io, the proposed rule is designated 223-1(b)(7). It requires a written agreement between the adviser and the client to treat each self-custodied crypto asset as a financial asset, with the adviser acting as a securities intermediary under applicable state law.
- A companion provision, proposed rule 17f-9 under the Investment Company Act, would let a regulated fund maintain its crypto assets through the fund's adviser. This applies only if the adviser complies with the self-custody rule and the fund's board of directors oversees the arrangement.
CoinDesk also pointed out that the SEC uses "self-custody" in an asset-management sense. That differs from how crypto companies usually use the term, which typically means a user holding their own private keys.
State Trust Companies as Custodians
The second pillar is the use of state trust companies. The SEC says it would allow them to custody crypto assets for clients and regulated funds, subject to conditions. The proposal addresses a gap for institutional investors, where qualified custodial infrastructure for some crypto assets may not yet exist. Briefs Finance reported that the proposal is intended to give advisers workable options in that situation.
Broader Custody Rule Changes
The proposal is not limited to crypto. TradingView, citing Seeking Alpha, reported that the SEC is seeking to amend the Investment Advisers Act of 1940 and the Investment Company Act of 1940. The amendments touch requirements relating to financial statement audits for registered investment advisers and broker-dealer custodial services for regulated funds. Securities.io likewise noted that the proposal would modernize custody rules more broadly. The practical scope may therefore reach beyond crypto-focused firms.
Why Custody Has Been a Sticking Point
Custody has long been one of the biggest obstacles for regulated managers who want crypto exposure. In February 2023, the SEC under then-Chair Gary Gensler issued a custody proposal that would have expanded the existing custody rules to cover a broad range of assets, including cryptocurrencies, and required that client assets be held by a qualified custodian. Gensler said at the time that, based on how crypto platforms generally operate, advisers could not rely on them as qualified custodians. Crypto firms such as Robinhood and SoFi flagged that proposal as a business risk in their regulatory filings.
The new proposal takes a different approach. It sets out custody pathways designed specifically for crypto and keeps regulatory conditions around how the assets are safeguarded.
The Policy Backdrop
The custody proposal arrives amid a busy stretch for U.S. crypto policy. Reports describe several related developments:
- The Clarity Act, the market-structure bill, stalled in a procedural Senate vote last month, according to coverage by The Block and Briefs Finance.
- The SEC sent the White House a proposal to clarify the custody framework before that vote.
- The SEC has released its long-awaited innovation exemption, and the CFTC has filed crypto asset rulemaking with the White House, according to The Block.
- CoinDesk reported that with this proposal, the SEC has addressed every major topic on the crypto agenda Atkins originally laid out.
The sequence suggests the agency is advancing its crypto agenda through rulemaking rather than waiting for legislation. That is an observation drawn from the reporting, not an official SEC statement.
Key Facts at a Glance
| Item | Detail | Status |
|---|---|---|
| Announcement date | October 1, 2026 | Confirmed by SEC |
| Who is covered | Registered investment advisers, registered investment companies and business development companies | Confirmed by SEC |
| Self-custody | Allowed in limited circumstances | Proposed |
| State trust companies | Allowed as custodians for clients and regulated funds | Proposed |
| Proposal length | 760 pages | Reported by CoinDesk |
| Related proposal | Regulation Crypto Asset (fundraising with digital assets) | Reported by CoinDesk |
What Is Confirmed and What Is Not
Confirmed by the SEC: the proposal exists, it covers advisers and regulated funds, and it would permit conditional self-custody and the use of state trust companies. The Chairman's quoted statements are also confirmed.
Reported by outlets: the page count, the specific rule numbers, the detailed self-custody conditions and the link to the Clarity Act's stall come from news coverage rather than the press release text reviewed for this article.
Not yet known: whether the rules will be adopted, in what form, and on what timeline. A proposal can change substantially after public comment. Nothing here takes effect until the Commission finalizes it.
Editorial Analysis: What It Could Mean
The following is analysis, not reported fact.
For asset managers. A defined custody route could make it easier for advisers and funds to offer crypto strategies that were hard to run under older rules. The limited nature of self-custody suggests regulators want it to be a backstop, not the default. Firms will likely still prefer a qualified custodian wherever one exists.
For custodians. Allowing state trust companies could widen the pool of eligible custodians. That may increase competition and give regulated managers more choice. How much it matters depends on which trust companies build the infrastructure and meet the conditions.
For investors. Clearer rules could bring more regulated products and strategies. They also place significant responsibility on advisers who self-custody. The requirements for expertise, a written agreement and board oversight at funds are the safeguards to watch. Their strength will determine how well client assets are protected.
Risks and Open Questions
- Final rule uncertainty. Comments from industry and investor advocates could reshape the proposal before adoption.
- Safeguarding standards. Questions about key management, insurance and operational controls will be central, since the proposal keeps conditions around how assets are protected.
- Political and legal context. With the Clarity Act stalled, agency-driven rules may face scrutiny over their scope and durability.
- Practical availability. The self-custody trigger depends on an adviser determining no permitted custodian is available. How that is documented and tested remains to be seen.
What to Watch Next
Watch for the public comment period and for responses from custodians, asset managers and investor advocates. Also watch how the proposal interacts with Regulation Crypto Asset, the SEC's innovation exemption and the CFTC's rulemaking. Together they will shape how regulated finance connects to crypto markets.
Frequently Asked Questions
What did the SEC propose on October 1, 2026?
The SEC proposed new rules and amendments creating a tailored framework for how registered investment advisers and regulated funds can custody crypto assets. It would allow limited self-custody and the use of state trust companies as custodians.
Is the proposal final?
No. It is a proposal. It must go through public comment and a Commission vote before it can take effect, and it may change along the way.
Who would the rules apply to?
They would apply to registered investment advisers and regulated funds, specifically registered investment companies and business development companies.
What does self-custody mean in this proposal?
It refers to an adviser holding client crypto assets itself rather than at a qualified custodian. Reporting indicates it would be allowed only in limited circumstances, such as when no permitted custodian is available and the adviser has the required expertise.
Why are state trust companies included?
The SEC says the proposal would allow them to custody crypto for clients and regulated funds. This addresses a gap where qualified custodial infrastructure for some crypto assets may not yet exist.
How does this differ from the SEC's 2023 approach?
The February 2023 proposal under then-Chair Gary Gensler would have required that client assets, including cryptocurrencies, be held by a qualified custodian. The new proposal creates custody pathways designed specifically for crypto.
Does this affect individual crypto investors directly?
Not immediately. The rules concern how advisers and regulated funds hold assets. Over time they could influence which regulated crypto products and strategies are offered. This article is informational and is not investment advice.
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