The United States Securities and Exchange Commission proposed rules on 1 October 2026 that would give registered investment advisers and regulated funds a defined framework for holding crypto assets, including limited self-custody and state trust companies as custodians. The SEC said in its proposal announcement that the rules amend the Investment Advisers Act of 1940 and the Investment Company Act of 1940, which were written for traditional assets.
Self-custody, but only where no custodian exists
Under the proposal, an adviser could hold client crypto itself only after establishing that no permitted custodian is available for each asset, and would have to reassess that determination quarterly. If a custodian becomes available, the assets would have to move across as soon as reasonably practicable, the proposal states.
Self-custody would come with conditions: safeguards around private keys and cybersecurity, separation of each client’s holdings, and approval by at least two authorised individuals for any transfer of a self-custodied asset. Regulated funds could keep crypto with their adviser under the same requirements, with the fund’s board overseeing the arrangement. An SEC official said such cases would likely be unusual, perhaps a newly launched token that custodians do not yet support.
The qualified custodian problem
Advisers must keep client assets with qualified custodians meeting strict safekeeping standards, but which crypto arrangements satisfy that bar has long been unclear, and many firms have stayed away from digital-asset strategies as a result. In a May 2025 submission to the SEC, the Digital Chamber said some advisers had declined token allocations or asked portfolio companies to hold them until custody became available. The proposal would also let state trust companies act as custodians, subject to state authorisation for crypto custody, loss-prevention procedures, audited financial statements and segregation of client assets, which widens the custody market beyond banks and broker-dealers.
Chairman Paul S. Atkins said the rules had not kept pace with a market that has grown from a niche curiosity into a multi-trillion-dollar asset class, and that the proposal would give advisers and funds a compliant pathway where none existed before.
The proposal is not final. A 60-day public comment period opens once the SEC’s release is published in the Federal Register, and the rules could still be revised before adoption.
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Saqib Iqbal
