The U.S. Securities and Exchange Commission has proposed a new regulatory framework to modernize crypto custody for registered investment advisers and regulated funds. Announced by SEC Chairman Paul Atkins on October 1, 2026, the proposal replaces outdated rules with a compliant pathway for digital assets. Key provisions allow advisers to self-custody client funds under limited conditions and permit state-chartered trust companies and broker-dealers to act as qualified custodians.
Adviser self-custody rules
- ▪The SEC's crypto custody rule, proposed October 1, 2026, allows registered investment advisers to self-custody client crypto assets if no qualified third-party custodian is available, subject to quarterly determinations and strict operational safeguards, cybersecurity protocols, asset segregation, and specialized expertise
- ▪The SEC's proposed self-custody provision for investment advisers stems from an industry request made to the SEC's Crypto Task Force
Expanding the types of qualified custodians
- ▪Allowing state trust companies to act as custodians expands crypto custody services beyond traditional banks, which sometimes lag in the technology and regulatory freedom needed to safeguard digital assets
- ▪The SEC's crypto custody framework, proposed October 1, 2026, permits the use of state-chartered trust companies as qualified custodians for client and regulated fund crypto assets under certain conditions
- ▪The SEC's crypto custody proposal, issued October 1, 2026, seeks to add regulated broker-dealers as legal crypto custodians, eliminating the requirement that these entities be part of a national securities exchange
Context and timeline of the proposal
- ▪The U.S. Securities and Exchange Commission proposed a new regulatory framework on October 1, 2026, to clarify how registered investment advisers and regulated funds can custody crypto assets
- ▪The U.S. Securities and Exchange Commission's crypto custody rule, proposed October 1, 2026, will enter a 60-day public comment period once it is published in the Federal Register
- ▪SEC Chairman Paul Atkins stated that existing custody rules, which largely predate the internet, were crafted for a bygone era and failed to keep pace with the multi-trillion-dollar crypto asset market
- ▪The SEC's crypto custody framework, proposed October 1, 2026, replaces the U.S. Securities and Exchange Commission's restrictive 2023 'Safeguarding Rule' proposal, which the agency withdrew in 2025
Debatable claims
- ▪The SEC should permit investment advisers to self-custody client crypto assets
- ▪State-chartered trust companies are better suited than traditional banks to custody crypto
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