SEC Proposes Custody Framework Letting Advisers and Funds Hold Crypto Assets Directly

MakeCryippreferred on

• The SEC proposed new rules on October 1, 2026 addressing how registered investment advisers and regulated funds can custody crypto assets under the Investment Advisers Act of 1940 and the Investment Company Act of 1940
• The proposal would permit self-custody of crypto assets under certain circumstances and allow state trust companies to serve as qualified custodians
• A 60-day public comment period will follow the proposal’s publication in the Federal Register

The Securities and Exchange Commission announced in an October 1, 2026 press release that it has proposed new rules addressing how registered investment advisers and regulated funds may custody crypto assets under the federal securities laws, a long-sought update for firms that have struggled to fit digital assets into custody rules written decades before cryptocurrency existed.

The proposal would modernize existing custody requirements under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, aiming to expand investor choice by removing some of the regulatory barriers that have discouraged registered advisers from offering crypto-related investment advice. Among its most significant provisions, the proposal would permit self-custody of crypto assets under certain defined circumstances and would allow state-chartered trust companies, not only federally regulated banks and broker-dealers, to serve as qualified custodians for client crypto holdings.

The rulemaking also updates financial statement audit requirements tied to custodied assets and revises how broker-dealers may provide custodial services for crypto, addressing a gap that has left many advisers uncertain about which custody arrangements would satisfy their fiduciary obligations to clients. SEC Chairman Paul S. Atkins framed the move against the backdrop of the asset class’s growth, noting that “since the advent of Bitcoin in 2008, the crypto asset market has grown…into a multi-trillion-dollar asset class.”

The proposal will be open for public comment for 60 days following its publication in the Federal Register, giving advisers, custodians, trust companies, and other market participants a formal window to weigh in before the SEC finalizes any rule. The custody question has been one of the more persistent frictions holding back broader adviser-level adoption of crypto, since advisers managing client assets are generally required to use a qualified custodian and the existing rules were never written with digital assets in mind.

Clarity on custody has been identified by industry participants as one of the last major pieces of plumbing needed before registered investment advisers can offer crypto exposure to clients with the same operational confidence they bring to equities, bonds, and other traditional asset classes. The proposal arrives as part of a broader wave of crypto-related rulemaking from the SEC this year, following its March 2026 interpretation clarifying how securities laws apply to different categories of crypto assets.