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SEC Proposes Crypto Self-Custody Rules for Advisers and Funds
Plan would permit limited self-custody and expand permitted crypto custodians
TL;DR
- The SEC proposed new crypto custody rules on October 1, 2026, covering registered investment advisers and regulated funds.
- Advisers could self-custody client crypto in limited circumstances, while qualifying state-chartered trust companies could serve as permitted custodians.
- The proposal remains subject to public comment for 60 days after publication in the Federal Register.
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The U.S. Securities and Exchange Commission proposed a new crypto custody framework on October 1, 2026, that would let registered investment advisers and regulated funds self-custody crypto assets under certain conditions while expanding the types of institutions permitted to provide custody. The measure is a proposal, not a final rule.
The framework would update requirements under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. SEC Chairman Paul Atkins said existing custody rules had failed to keep pace as crypto developed from Bitcoin's launch in 2008 into a multi-trillion-dollar asset class.
“Unfortunately, our rules and regulations have not kept pace,” Atkins said. He added: “To that end, today’s 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 and replacing the grey of uncertainty created by custody rules crafted for a bygone era.”
How the SEC’s Crypto Self-Custody Proposal Would Work
The self-custody provision would apply in limited circumstances, including cases where an adviser determines that no permitted custodian is available. Here, self-custody means an adviser acting as custodian for client assets rather than an individual investor personally controlling a wallet. Advisers taking that route would face safeguards covering custody expertise, cybersecurity, annual reviews, internal reporting, account statements and client disclosures.
SEC Commissioner Mark Uyeda said adviser self-custody creates an inherent conflict of interest and that an adviser’s fiduciary duties continue to apply when it holds client crypto.
The proposal would separately recognize state-chartered trust companies as permitted crypto custodians under specified conditions. Advisers and funds would need a reasonable basis to believe a trust company is authorized by its state banking regulator and maintains written protections against theft, loss and misuse.
SEC Commissioner Hester Peirce backed preserving custody choice, saying: “True self-custody is not the right choice for everyone, but many crypto owners prize being able to custody their own assets.”
Crypto market participants also welcomed the proposed shift. Analyst Dan Gambardello said: “For years, old rules built for stocks and bonds left firms with no compliant path to hold Bitcoin and other crypto for clients. Today’s proposal opens that door. This is the unlock institutions have been waiting for.”
ETF analyst Nate Geraci described the proposal as a “breath of fresh air,” adding: “Such a breath of fresh air for regulators to support innovation & actually let the crypto industry breathe.” Coinbase and Fidelity already provide third-party custody services for funds and ETFs holding Bitcoin and Ethereum, while the proposal could broaden custody coverage for smaller and newer crypto assets.
The cited market data showed funds and ETFs holding 1.44 million BTC, equal to 7% of Bitcoin supply, compared with 13.9 million BTC, or 66.6%, held by individuals.
SEC Opens 60-Day Comment Period
The SEC said public comments will remain open for 60 days after the proposing release is published in the Federal Register. The new framework follows a 2023 custody proposal that was later withdrawn after industry criticism over its treatment of crypto custody.
The proposal also comes as Peirce departs the SEC after leading its Crypto Task Force. Her departure leaves the commission with two sitting members as the agency continues its digital-asset rulemaking agenda.
This article has been refined and enhanced by ChatGPT.
