SEC proposes new crypto custody rules for investment advisers and funds

The U.S. Securities and Exchange Commission unveiled a proposed custody rule for crypto assets on Oct. 1, 2026, seeking to clarify how investment advisers and regulated funds may hold client digital assets. The 760-page proposal sets out which types of firms can act as custodians for crypto, updates recordkeeping and disclosure expectations, and specifies auditing and industry practice requirements. The agency said the move addresses shortcomings in custody rules originally written for traditional assets. A notable element of the proposal is a conditional allowance for advisers to self-custody client crypto holdings. That option would be available only when a qualified custodian cannot be found, would require the adviser to demonstrate necessary expertise to hold digital assets, and must be re-evaluated quarterly to determine whether a custodian has become available. SEC officials described such circumstances as likely uncommon, for example applying to newly launched tokens not yet supported by custodians. The rule would also explicitly permit state-chartered trusts to serve as custodians, and it clarifies the kinds of companies that can properly maintain crypto assets as well as related disclosures and records advisers and funds must keep. The proposal is part of a broader SEC push on digital-asset rulemaking this year that has already included an Innovation Exemption for tokenized securities and a Regulation Crypto Asset proposal addressing digital-asset fundraising. Thursday’s publication coincides with Commissioner Hester Peirce’s final week at the agency; she has led the SEC’s Crypto Task Force since its creation and departs on Friday. Separately this week the SEC reduced the number of commissioners required to form a quorum from three to two. The custody proposal is open for a 60-day public comment period as it proceeds through the rulemaking process.