The Securities and Exchange Commission proposed rules on Thursday establishing a tailored framework for how registered investment advisers and regulated funds may custody crypto assets, accor
The Securities and Exchange Commission proposed rules on Thursday establishing a tailored framework for how registered investment advisers and regulated funds may custody crypto assets, according to the agency.
Regulated funds here means registered investment companies and business development companies.
This proposal is pursuant to the Investment Advisers Act of 1940 and the Investment Company Act of 1940, has filing number S7-2026-35, and will open a 60-day comment period upon its publication in the Federal Register.
According to Chairman Paul Atkins, “the market [had] evolved from a niche curiosity to a multi-trillion-dollar asset class,” but at the same time, the regulation regarding custody was still written for the past era.
Advisers have an obligation to entrust their clients’ assets with qualified custodians that meet stringent requirements regarding safekeeping. The applicability of the qualified-custodian standards in the context of most crypto cases has been ambiguous, posing regulatory risks to any adviser considering crypto-related strategies. The proposed rule aims at clearing this ambiguity in two ways.
Crypto assets could be held in self-custody where certain conditions are met, a departure from the assumption that a third party must always hold them.
State trust companies could serve as custodians for both client and fund crypto. The proposal also revises requirements on financial-statement audits for registered advisers and on the broker-dealer custodial services regulated funds use.
In February 2023 the Commission went the other way. It voted 4-1 to propose a rule called Safeguarding Advisory Client Assets, which would have required advisers to place every client asset with an approved custodian, not just cash and securities. Crypto was the asset class it was written for. Advisers would have needed a signed contract with each custodian, client assets kept separate from the custodian’s own, and surprise visits from an outside accountant to confirm the assets existed.
Hester Peirce voted against it. Her objection was that the rule widened the requirement while narrowing the list of firms allowed to satisfy it, leaving advisers holding client crypto with nowhere compliant to put it. The SEC withdrew the proposal in June 2025. Thursday’s release is its successor and answers the central question in the opposite direction.
On September 30, 2025 the Division of Investment Management said it would not recommend enforcement against advisers or funds treating certain state-chartered trust companies as banks for crypto custody, subject to disclosure and best-interest conditions.
Commissioner Caroline Crenshaw dissented in a statement titled “Poking Holes,” arguing the relief diluted investor protections and that custodianship required formal rulemaking rather than staff positions. She resigned in January. A December 2025 statement gave broker-dealers a parallel path.
The custody proposal sits alongside the agency’s innovation exemption and its Regulation Crypto Assets work, all of it proceeding under existing authority while the CLARITY Act market structure bill remains stalled in the Senate.
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