SEC proposes crypto custody rules for US advisers and funds

The US Securities and Exchange Commission proposed new rules on October 1 that would give investment advisers and funds a clear way to hold crypto for clients. The plan allows limited self-custody and lets state trust companies act as custodians.

SEC Chairman Paul Atkins said the proposal would "provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before." The release went out Thursday. A 60-day public comment period opens once the text is published in the Federal Register.

What the rules would change

Current custody rules date to a different era. The Investment Advisers Act and the Investment Company Act of 1940 set how advisers and funds must safeguard client money, long before crypto existed. Atkins said those older rules "were designed to protect the assets of advisory clients and regulated funds from loss, theft, misuse, and misappropriation," yet firms were left guessing how to apply them to tokens.

This plan tries to close that gap. It would let advisers and registered funds use state-chartered trust companies as qualified custodians, alongside the banks and broker-dealers already allowed. It would also update audit and broker-dealer custody requirements to match how crypto moves today. Atkins pointed to a practical problem: with new tokens, he said, "custodial capabilities may lag an asset's deployment by many months."

For fund managers the shift is concrete. The SEC said removing these barriers would let advisers offer crypto advice they had held back on, and let regulated funds give clients a wider range of crypto strategies.

The self-custody catch

Self-custody sounds like a win for people who want to hold their own keys. Not quite. The proposal lets advisers and funds hold client crypto themselves, and only when no qualified custodian is available for that asset. Advisers would have to review that availability every quarter and show they have the right expertise and internal controls.

Commissioner Hester Peirce backed the approach. "True self custody is not the right choice for everyone, but many crypto owners prize being able to custody their own assets," she said. Peirce added that regulators "should zealously protect investors' right to self-custody and not attempt to force investors to custody their assets with someone else." She leaves the SEC on October 2, a day after the proposal.

Where the custody plan fits

Custody is the latest piece of a wider SEC push on crypto under Atkins. It follows proposals the agency calls the Innovation Exemption and Regulation Crypto Assets, both meant to give token projects and trading venues clearer rules. Atkins has tied the work to the Trump administration's stated goal of making the US a global center for the industry.

What is not yet clear is how often the self-custody exception would actually apply. The SEC suggested it would be unusual, most likely limited to newly launched tokens that no established custodian supports. None of it is settled. A proposal is not law.

What to watch

Sixty days of comment begin once the proposal reaches the Federal Register, which had not happened as of October 1. The wording to watch is how the SEC defines a qualified custodian, because that decides which firms can legally hold crypto for regulated funds. Also worth tracking is whether Peirce's exit changes the tone of the agency's crypto work, and which adviser moves first if a rule is ever adopted.