SEC proposes crypto custody rules for investment advisers and funds

Update (Oct 1, 9:05pm): The draft reveals the SEC has pursued crypto regulatory framework efforts since late 2025, a forward-looking timeline absent from the published version.

Update (Oct 1, 9:04pm): The draft update mentions SEC pursuing crypto regulatory framework efforts since late 2025, a forward-looking timeline absent from the published version which only references Bitcoin's 2008 advent.

Update (Oct 1, 8:57pm): New draft states the SEC has pursued crypto regulatory framework efforts since late 2025, whereas published version cites 2008 as Bitcoin's advent year with no forward-looking regulatory timeline mentioned.

The Securities and Exchange Commission today proposed new rules and amendments governing how registered investment advisers and regulated funds may custody crypto assets under federal securities law. The proposal would for the first time let advisers self-custody crypto under certain conditions and let state-chartered trust companies serve as custodians for client and fund crypto holdings.

• Proposal covers registered investment advisers, registered investment companies and business development companies
• Comment period runs 60 days after publication in the Federal Register
• Updates touch RIA financial statement audit rules and broker-dealer custodial services for funds

• 60 days public comment window after Federal Register publication
• 2008 year of Bitcoin’s advent cited by Chairman Atkins

The SEC said the proposal would amend rules under both the Investment Advisers Act of 1940 and the Investment Company Act of 1940, giving advisers and funds “a tailored framework for the custody of crypto assets,” according to the release. The agency said the changes are meant to “modernize custody rules and expand investor choice by removing regulatory barriers that inhibit the adviser’s ability to provide crypto-related investment advice.” The release states the public comment period “will remain open for 60 days following the publication of the SEC’s proposing release in the Federal Register.”

What the release spells out

The proposal updates financial statement audit requirements for registered investment advisers and revises broker-dealer custodial service rules that apply to regulated funds. It would permit self-custody of crypto assets “under certain circumstances,” a phrase the release does not define further, and would authorize state trust companies as an additional custodian option for both advisory clients and regulated funds.

SEC Chairman Paul S. Atkins framed the move as closing a regulatory gap that has existed since crypto markets expanded far beyond their early size. In a statement accompanying the release, Atkins said current rules were “crafted for a bygone era” and that the proposal gives firms “a compliant pathway where none existed before.”

What the document leaves open

The release does not specify the conditions under which self-custody would be permitted, nor does it define qualification standards for state trust companies seeking to act as custodians for regulated funds. It also does not disclose a Commission vote count on the proposal, list specific audit or custodial rule text, or name an effective date beyond the start of the comment period.

Those details sit in the underlying proposed rule text and the accompanying fact sheet, both referenced but not quoted at length in the release itself. The release also does not address how the proposal interacts with existing state money-transmitter or trust-charter regimes that already supervise some of the trust companies it would newly authorize.

Why custodians and advisers are watching

Under the current Advisers Act custody rule, qualified custodians have generally been limited to banks, certain broker-dealers and a narrow set of other regulated entities, a structure crypto industry participants have long argued excludes most crypto-native custody providers. Opening the door to state trust companies and conditional self-custody would broaden the pool of entities advisers can use without violating custody obligations, potentially lowering costs for firms that have relied on a small number of qualifying custodians.

For regulated funds, the update to broker-dealer custodial service rules could affect how BDCs and registered investment companies structure crypto exposure inside existing wrapper products, a question that has constrained fund sponsors seeking to launch crypto strategies within the ’40 Act framework. The practical effect depends on the conditions the proposed rule text attaches to self-custody, which the release does not itemize.

“today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment 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”

Paul S. Atkins, SEC Chairman, in a statement accompanying the release

The BlockWest read. Allowing state trust companies and conditional self-custody is the operative change for allocators who have been boxed out by the bank-and-broker-dealer custody bottleneck. The real test is in the proposed rule’s definition of “certain circumstances” for self-custody, which will determine whether this opens meaningful new capacity or simply formalizes a narrow carve-out.

The 60-day comment window opens once the proposing release is published in the Federal Register, setting up the next deadline for industry groups, custodians and fund sponsors to respond before the SEC can move toward adoption.

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