SEC proposes crypto custody path for advisers and funds

The Securities and Exchange Commission proposed new crypto custody rules on Oct. 1, 2026, for registered investment advisers and regulated funds, creating a framework for assets that may be difficult to place with traditional custodians. The proposal would allow state trust companies to serve as custodians and permit advisers to hold some client crypto themselves, subject to safeguards. The SEC’s announcement of the proposal says it would also update related reporting and recordkeeping requirements.

When could an adviser hold crypto itself?

Under the SEC’s proposed rule, an adviser would first have to determine that a qualified custodian is unavailable for the crypto asset. It would need to make that determination in writing before taking custody and revisit it at least quarterly. If a qualified custodian later became available, the adviser would have to move the asset there as soon as reasonably practicable.

Here, “self-custody” means the adviser possesses some of the key material used to control the crypto asset. It does not mean an investor personally holds the keys. The proposal would require the adviser to show it has expertise safeguarding each asset and systems to protect it from loss, theft, misuse and misappropriation.

The SEC’s proposed rule specifies several controls: manage private keys, require at least two people to authorize transactions, and keep each client’s assets at separate blockchain addresses. Advisers would also need cybersecurity controls reviewed at least annually, an annual internal control report from an independent public accountant, and quarterly account statements for clients whose assets they self-custody.

What role would a state trust company play?

A state trust company could hold client or regulated-fund crypto if the adviser or fund had a reasonable basis, after due inquiry, to believe the company was authorized by its state banking regulator to provide crypto custody. The proposal would also require the adviser or fund to check that the company has written policies designed to safeguard crypto assets and related cash from theft, loss, misuse and misappropriation. That review would be required before hiring the custodian and annually afterward.

The two routes address different arrangements: a state trust company would hold the assets as a custodian, while self-custody would leave the adviser holding key material. For a regulated fund using its adviser’s self-custody, the proposal would also require oversight by the fund’s board.

Would the proposal take effect now?

No. The SEC has proposed the rules; they are not final requirements. The agency’s rule page says comments are due 60 days after publication in the Federal Register. The proposal covers registered advisers’ client crypto funds and securities, and regulated funds’ crypto securities and similar investments. If adopted, it would set conditions for custody; it would not by itself make every crypto asset eligible for investment by an adviser or fund.