+34
The SEC has proposed a new crypto custody framework that would allow registered investment advisers and regulated funds to hold digital assets, including through self-custody under certain conditions.
The U.S. Sec urities and Exchange Commission ( SEC) has proposed a sweeping new crypto custody framework that could make it easier for registered investment advisers and regulated funds to hold digital assets on behalf of clients. The proposal, announced in October 2025, would amend custody requirements under the Investment Advisers Act of 1940 and the Investment Company Act of 1940.
The framework would provide a pathway for advisers and funds to gain exposure to crypto assets, including, in some cases, through self-custody. This marks a significant shift in how the SEC approaches digital asset regulation.
Background and Rationale for the Proposal
SEC Chairman Paul Atkins stated that existing custody rules were built around a financial system that looked very different from today's. Bitcoin did not exist when much of the framework was developed. Since then, crypto has become a multi-trillion-dollar asset class sought by investors.
Atkins said the proposal is intended to replace the regulatory uncertainty surrounding crypto custody with a defined compliance framework for investment advisers and funds. In his words, the existing rules had been crafted for a bygone era.
The proposal aims to modernize the regulatory approach to digital assets, reflecting their growing role in the financial markets.
Key Provisions and Conditions
The SEC would permit advisers to self-custody certain crypto assets when an appropriate outside custodian is unavailable. State-chartered trust companies would also receive a pathway to be crypto custodians.
However, the proposal does not simply give investment advisers unrestricted permission to hold private keys themselves. An adviser would first have to determine that a permitted custodian is unavailable for the particular crypto asset. This determination would have to be made before the adviser takes custody and then repeated at least once every quarter.
Self-custody would function as a conditional alternative. The adviser would also need to show that it has the necessary expertise to safeguard the specific crypto asset. Custodians would have to address private-key management and joint authorization by at least two people.
Advisers would also have to maintain each client's crypto in one or more blockchain addresses containing only that client's assets. An adviser would need to prepare a report examining controls connected to custodial services, including necessary safeguards.
Client Protections and Reporting Requirements
Clients would receive account statements at least quarterly. Those statements would identify the blockchain address holding the client's crypto and the network on which the address operates.
The proposal includes measures to ensure transparency and accountability. Advisers would be required to implement robust controls to protect client assets.
These requirements are designed to address concerns about the safety and security of digital assets held by advisers and funds.
Next Steps and Public Comment
For now, the proposal remains just a proposal. The public will have 60 days to submit comments in the Federal Register. The final form of the rules could change following public feedback.
This comment period provides an opportunity for stakeholders to voice their opinions and suggest modifications. The SEC will consider all feedback before finalizing the framework.
The proposal is part of a broader effort to adapt regulatory frameworks to the evolving landscape of digital assets. It follows other recent developments in the crypto space, such as Uphold's launch of an industry-first XRP, BTC, and HBAR inheritance solution for its integrated self-custody wallet, and Amaze Holdings' (NYSE: AMZE) execution of a binding LOI to acquire BullionFX for US$155 million.
As the SEC seeks to balance innovation with investor protection, the outcome of this proposal could have far-reaching implications for the crypto industry and traditional financial institutions alike.
Scratch the next story
SEC Crypto Custody Investment Advisers Digital Assets Paul Atkins Self-Custody Regulated Funds
United States Latest News, United States Headlines
Similar News: You can also read news stories similar to this one that we have collected from other news sources.
Cactus Custody Launches Swiss Custody Service, With Keys and Client Data Held in SwitzerlandOperated by ChainTech AG, the new service joins Cactus Custody's Hong Kong and Bhutan operations and supports 132 assets across 18 networks at launch, with client assets segregated under Swiss law.
Read more »
U.S. SEC maps out crypto custody in new proposal that furthers its digital assets agendaThe regulator issued a proposed rule for custody, marking a swan song for its inaugural Crypto Task Force chief, Commissioner Hester Peirce, who exits this week.
Read more »
SEC proposes framework allowing investment advisers, funds to self-custody cryptoThe proposal would let advisers and funds self-custody crypto in some cases and use state trust companies, as regulators push ahead after the Clarity Act's Senate defeat.
Read more »
SEC Proposes Easing Crypto Custody Rules for AdvisersThe SEC proposed new crypto custody rules that would let investment advisers self-custody some assets and use eligible state trust companies as custodians.
Read more »