The US Securities and Exchange Commission (SEC) on 1 October 2026 proposed a dedicated framework for how registered investment advisers and regulated funds may hold crypto assets for their clients. The proposal would let state-chartered trust companies act as crypto custodians and, under strict conditions, allow advisers to hold some assets themselves. Chairman Paul Atkins said it would give advisers and funds “a compliant pathway where none existed before”.
What the SEC crypto custody proposal covers
The package amends rules under the Investment Advisers Act and the Investment Company Act of 1940. It applies to registered investment advisers and to regulated funds, meaning registered investment companies such as mutual funds and business development companies. According to law firm Sidley, the current adviser custody rule, Rule 206(4)-2, would be renumbered Rule 223-1, and new fund rules would be added:
- State trust companies would become a new category of qualified custodian for crypto assets, next to banks and broker-dealers (proposed Rule 17f-8 for funds).
- Custody through the fund’s adviser would be possible under proposed Rule 17f-9, with the fund board reviewing the arrangement before it starts and every quarter.
- Broker-dealers could hold fund assets under protections modelled on Exchange Act Rule 15c3-3.
Self-custody by advisers: allowed, but only as a last resort
The most closely watched part is adviser self-custody. An adviser could keep a client’s crypto asset itself only after determining in writing, following a reasonable inquiry, that no permitted custodian will hold it. That determination must be renewed at least every quarter, and cost is not an acceptable reason. Once a custodian becomes available, the asset must be moved.
The conditions summarised by Sidley and by Croke Fairchild Duarte & Beres are demanding:
- documented expertise and key-management controls, with two designated people approving every transfer;
- separate blockchain addresses for each client;
- an annual written cybersecurity risk assessment;
- an internal control report from an independent accountant within six months, then every year (a SOC 1 Type 2 report qualifies);
- quarterly client statements showing the blockchain address and network.
Which assets are in scope
The scope depends on the client. For advisory clients, the rule reaches crypto assets that are “funds or securities”, such as payment stablecoins from permitted issuers under the GENIUS Act, tokenised deposits and tokenised securities. The SEC states that bitcoin, ether and solana are generally not funds or securities, so they would generally fall outside the adviser rule. For regulated funds, the same digital commodities count as “securities and similar investments” and must follow the fund custody rules.
The proposal does not address staking specifically and declines to create a general exemption for DeFi. It asks more than 300 questions, according to Sidley.
Broader custody reforms
Some changes apply whether or not an adviser touches crypto. Auditors of private funds would no longer need to be registered with and inspected by the PCAOB, although they must stay independent. New exceptions would cover inadvertent custody and certain discretionary trading authority. Form ADV and Form N-CEN would gain questions on crypto custody and tokenised funds.
What it means for investors
For savers who use a financial adviser or a fund, the proposal could widen the menu of regulated products holding crypto and clarify who safeguards the assets. It does not change how individuals store their own coins: the basics of keys and wallets are explained in our guide to crypto wallets. Custody remains a central risk in crypto, as past platform failures showed, and new rules do not remove market risk.
What happens next
The comment period runs for 60 days after publication in the Federal Register. The SEC may then adopt final rules, change them or drop them. Points to watch:
- the publication date in the Federal Register, which sets the comment deadline;
- feedback from banks, trust companies and crypto custodians on the self-custody conditions;
- how the rule fits with the SEC’s other crypto proposals, including “Regulation Crypto Assets”, whose comment period closes on 20 October 2026.