The U.S. Securities and Exchange Commission proposed new rules on October 1, 2026, defining how registered investment advisers and regulated funds can custody crypto assets. The proposal would allow conditional self-custody and recognize state trust companies as custodians.
Filed under File No. S7-2026-35, the proposal was published in the Federal Register on October 6, 2026. The public comment period runs through December 7, 2026.
The package, titled “Adviser and Regulated Fund Custody Rules; Crypto Custody Rules,” would let advisers hold a client’s crypto private keys when no qualified custodian is available. It would also add state-chartered trust companies to the list of permitted custodians.
SEC Chair Paul S. Atkins said the plan would give 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.”
What the Proposal Would Change
The proposal addresses two gaps created by custody rules written for stocks and bonds. Under the current Advisers Act custody rule, an adviser generally must place client assets with a qualified custodian, such as a bank or broker-dealer.
Many crypto assets have no such custodian. As a result, advisers have either avoided certain digital assets or relied on case-by-case staff relief.
Under the proposal, an adviser could self-custody a client’s crypto asset by holding the private keys needed to transact in it. Self-custody would be a fallback, not the default.
Before using self-custody, the adviser would have to determine in writing, after due inquiry, that no qualified custodian will maintain that particular asset. The adviser would have to repeat that determination at least every quarter.
The plan also proposes a parallel rule allowing a regulated fund to hold crypto through its adviser. The fund’s board would oversee the custody arrangement.
State trust companies would also be explicitly recognized as permitted custodians for advisory and regulated-fund crypto assets. The change would resolve uncertainty over whether a state trust company qualifies as a bank for custody purposes.
That designation would be subject to initial and annual diligence covering the trust company’s state authorization, audited financials, internal control reports and segregation of client assets.
Conditions Advisers and Funds Would Face
Self-custody would create a substantial compliance burden. An adviser using the exception would need to document its safeguarding expertise and maintain systems for private key management, joint authorization by at least two people, separate blockchain addresses for each client, and cybersecurity.
The adviser would also need an internal control report from an independent public accountant within six months of first taking self-custody and annually thereafter. It would have to provide quarterly account statements to clients.
The adviser and client would also have to agree in writing to treat each self-custodied asset as a financial asset and the adviser as a securities intermediary under state law.
The proposal would redesignate the Advisers Act custody rule. It would also amend Form ADV and Form N-CEN with new questions on tokenized private funds and regulated investment company shares.
The Commission also requested comment on decentralized finance and crypto asset trading arrangements.
Why the Timing Matters
The proposal follows the Commission’s withdrawal of an earlier safeguarding rule in June 2025 and staff’s September 30, 2025 no-action letter on state trust companies.
The agency had sent its crypto custody rule overhaul to the White House for review in August. That step signaled that formal rulemaking was near.
The new release turns that preparatory work into a concrete proposal open for public comment.
The broader context matters because the SEC has been addressing the gap left by stalled legislation. With the Digital Asset Market Clarity Act still pending in the Senate, agency rulemaking is one of the few near-term avenues for a federal crypto framework.
The release builds on the Commission’s revived crypto custody push. That effort aims to give advisers certainty instead of no-action relief.
What Happens Next
The proposal is not a final rule, and no effective date exists. Comments must be received by December 7, 2026, through the Commission’s online comment form or by email to rule-comments@sec.gov, referencing File No. S7-2026-35.
The text could change after the comment period. Advisers that currently rely on the 2025 no-action letter would need to compare their custody arrangements with the final rule once adopted.
A summary of the proposal is posted on the Commission’s website.
