SEC Proposes Rules for Crypto Custody by Registered Advisers and Funds
The Securities and Exchange Commission (SEC) has proposed new rules for how registered investment advisers and regulated funds can custody crypto assets. The proposal aims to clear up ambiguity around the qualified custodian standard, which was previously unclear in the context of most crypto cases.
According to Chairman Paul Atkins, 'the market [had] evolved from a niche curiosity to a multi-trillion-dollar asset class,' but the regulation regarding custody was still written for the past era. The proposed rule would allow advisers to hold client crypto assets in self-custody under certain conditions or have state trust companies serve as custodians.
The new framework is a departure from a previous proposal that was withdrawn in June 2025. The 2023 Safeguarding Advisory Client Assets proposal would have required advisers to place every client asset with an approved custodian, but it was met with opposition due to its restrictive requirements and limited list of compliant firms.
The SEC's Division of Investment Management had previously given guidance on crypto custody in September 2025, stating that it would not recommend enforcement against advisers or funds treating certain state-chartered trust companies as banks for crypto custody, subject to disclosure and best-interest conditions. Commissioner Caroline Crenshaw dissented from the proposal, arguing that it diluted investor protections.