The U.S. Securities and Exchange Commission proposed new rules on October 1, 2026 that would define how registered investment advisers and regulated funds can custody crypto assets, opening a path to conditional self-custody and to state trust companies as custodians. The proposal, filed under File No. S7-2026-35, was published in the Federal Register on October 6, 2026 and is open for public comment through December 7, 2026.
The package, titled “Adviser and Regulated Fund Custody Rules; Crypto Custody Rules,” would let advisers hold a client’s crypto private keys themselves when no qualified custodian is available, and would add state-chartered trust companies to the list of permitted custodians. SEC Chair Paul S. Atkins said the plan would give 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.”
What the Proposal Would Change
The proposal targets two gaps that have made crypto custody awkward under rules written for stocks and bonds. Under the current Advisers Act custody rule, an adviser generally must place client assets with a qualified custodian such as a bank or broker-dealer. Many crypto assets have no such custodian, which has left advisers either avoiding certain digital assets or relying on case-by-case staff relief.
Under the proposal, an adviser could take self-custody of a client crypto asset by holding the private keys needed to transact in it. Self-custody is a fallback rather than a default: the adviser would first have to determine in writing, after due inquiry, that no qualified custodian will maintain that particular asset, and repeat that determination at least every quarter. The plan separately proposes a parallel rule that would let a regulated fund hold crypto through its adviser, with the fund’s board overseeing the custody arrangement.
State trust companies would also be explicitly recognized as permitted custodians for advisory and regulated-fund crypto assets. That change would remove the uncertainty over whether a state trust company qualifies as a bank for custody purposes, subject to initial and annual diligence on the trust company’s state authorization, audited financials, internal control reports and segregation of client assets.
Conditions Advisers and Funds Would Face
Self-custody would carry a substantial compliance burden. An adviser relying on the exception would need to document safeguarding expertise and maintain systems covering private key management, joint authorization by at least two people, separate blockchain addresses for each client, and cybersecurity. It would also need an internal control report from an independent public accountant within six months of first taking self-custody and annually thereafter, plus quarterly account statements to clients.
The adviser and client would also have to agree in writing to treat each self-custodied asset as a financial asset and the adviser as a securities intermediary under state law. The proposal would redesignate the Advisers Act custody rule, amend Form ADV and Form N-CEN with new questions on tokenized private funds and regulated investment company shares, and request comment on decentralized finance and crypto asset trading arrangements.
Why the Timing Matters
The proposal arrives after the Commission withdrew an earlier safeguarding rule in June 2025 and after staff issued a September 30, 2025 no-action letter on state trust companies. The agency had sent its crypto custody rule overhaul to the White House for review in August, a step that signaled formal rulemaking was near. The new release turns that preparatory work into a concrete, commentable proposal.
The broader context matters because the SEC has been filling the gap left by stalled legislation. With the Digital Asset Market Clarity Act still pending in the Senate, agency rulemaking is one of the few near-term avenues for a federal crypto framework. The release builds on the Commission’s revived crypto custody push aimed at giving advisers certainty instead of no-action relief.
What Happens Next
The proposal is not a final rule, and no effective date exists. The text could change after the comment period, and advisers that currently rely on the 2025 no-action letter would need to re-map their custody arrangements against the final rule once adopted. A summary of the proposal is posted on the Commission’s website.
