SEC Proposal Would Address How Investment Advisers and Funds Can Custody Crypto Assets Under the Federal Securities Laws
On Oct. 1, 2026, the U.S. Securities and Exchange Commission proposed new rules and amendments creating a tailored custody framework for crypto assets held by registered investment advisers and regulated funds, including registered investment companies and business development companies. The proposal updates custody-related requirements under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, and would permit certain forms of self-custody and the use of state trust companies as custodians.
Why It Matters
The plan aims to modernize legacy custody rules that the SEC says have not kept pace with the growth of crypto markets, potentially clearing regulatory uncertainty that has constrained advisers and funds from offering crypto-related strategies. By defining acceptable custody approaches, the proposal could broaden institutional access to crypto products within the federal securities-law framework.
Key Facts
- Agency: U.S. Securities and Exchange Commission (SEC)
- Date: Oct. 1, 2026
- Statutory basis: Investment Advisers Act of 1940 and Investment Company Act of 1940
- Covered entities: Registered investment advisers; regulated funds, including registered investment companies and business development companies
- Key changes: Permits certain self-custody; allows state trust companies to serve as custodians; updates financial-statement audit and broker-dealer custodial-service requirements
The Securities and Exchange Commission on Oct. 1 proposed a set of rules and amendments intended to create a specific custody framework for crypto assets held by registered investment advisers and regulated funds. The proposal, issued under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, is designed to replace or augment custody provisions that the agency says were written for earlier market conditions.
Among the changes the SEC outlined, the proposal would permit crypto assets to be held in self-custody in defined circumstances and would authorize state trust companies to act as custodians for client and fund crypto assets. It also would revise requirements related to financial-statement audits for registered investment advisers and update rules governing broker-dealer custodial services for regulated funds.
SEC Chairman Paul S. Atkins framed the proposal as a modernization effort, saying the agency sought to provide a clear regulatory path where existing custody rules created uncertainty. The Commission said the move is intended to expand investor choice by removing regulatory barriers that have limited advisers’ ability to provide crypto-related advice and funds’ ability to offer crypto-related strategies.
The SEC will accept public comments on the proposal for 60 days after the proposing release appears in the Federal Register. The agency characterized the rule set as tailored to current industry practices and as an effort to bring custody rules into alignment with the multi-trillion-dollar size of the crypto-asset market that has developed since Bitcoin's creation in 2008.
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Original source: SEC Newsroom