SEC Proposes Rules to Clear Up How Advisers and Funds Can Hold Crypto

The Securities and Exchange Commission on Wednesday unveiled a proposed custody regime tailored to crypto assets for registered investment advisers and regulated funds. The initiative seeks to clarify which custody arrangements satisfy the "qualified custodian" requirement that advisers must meet when holding client assets — a long-running source of uncertainty that has limited some firms' willingness to offer crypto strategies. Under the proposal, advisers and funds could use state-chartered trust companies as custodians, and certain forms of self-custody would be permitted if they meet specified conditions. The rulemaking would also revise requirements tied to financial-statement audits for advisers and update broker-dealer custody rules applicable to funds, aiming to modernize safeguards that were developed before widespread digital-asset use. SEC Chair Paul Atkins framed the move as an attempt to close a regulatory gap he said has arisen as the crypto market expanded since Bitcoin's debut in 2008, noting that existing rules "have not kept pace" and that the proposal would replace longstanding uncertainty. The custody plan is one element of a broader post-Clarity Act agenda at the agency, which has also introduced an innovation exemption for tokenized stock trading, proposed a fundraising framework called Regulation Crypto Assets, and clarified staff views on token buybacks. The proposal is not final. Once published in the Federal Register, it will open a 60-day public comment period, after which the SEC may revise the text before any vote to adopt the rules. The package is designed to provide a clearer compliance path for professional managers and regulated funds seeking to include crypto in client and fund portfolios.