SEC Proposes Crypto Custody Rules Amid Regulatory Void

The U.S. Securities and Exchange Commission (SEC) has proposed a significant change allowing investment advisers and funds to hold clients' crypto assets directly when no approved custodian is available. This 760-page proposal, released on October 1, 2026, follows the failure of the Clarity Act in the Senate, pushing the SEC to establish crypto rules independently. The plan introduces two paths: the first involves state-chartered trust companies, while the second permits advisers or funds to hold crypto themselves under strict conditions.

The proposal aims to address the longstanding issue of custody in crypto, where controlling a private key is crucial. For years, advisers had to rely on qualified custodians, typically banks or regulated brokers, but many crypto tokens lacked such options. The new rules require quarterly checks for the availability of custodians and impose safeguards like two-person approval for transactions and separate crypto addresses for each client.

Despite these measures, the proposal's biggest weakness lies in the SEC's current composition. With only two commissioners remaining, the rule could be finalized without Democratic input, making it vulnerable to future changes. SEC Chairman Paul Atkins has framed this as a step toward making the U.S. the 'Crypto Capital of the World,' but the lack of legislative backing raises questions about its long-term stability.