The U.S. Securities and Exchange Commission proposed new rules and amendments on October 1, 2026 addressing how registered investment advisers and regulated funds can custody crypto assets under federal securities laws, arriving as regulators push ahead with agency-level rulemaking following the Senate’s September 15 defeat of the CLARITY Act.
SEC Chairman Paul Atkins said the proposal would give investment advisers and funds a compliant pathway where none existed before, replacing the uncertainty created by custody rules crafted for a bygone era. The proposal would also permit certain crypto assets to be held in self-custody and allow state trust companies to serve as custodians under specified conditions.
The SEC also announced the proposal through its official X account:
What Counts as “Self-Custody” Here Isn’t What It Sounds Like
A dedicated framework would address crypto custody specifically for registered investment advisers and regulated funds, including investment companies and business development companies, while modernizing requirements around financial statement audits and broker-dealer custodial services.
| Proposed Custody Arrangement | Treatment Under Proposal |
| Qualified custodians | Crypto-specific custody requirements |
| State trust companies | Permitted under specified conditions |
| Self-custody | Permitted in certain circumstances |
| Broker-dealer custody | Existing requirements would be updated |
Table 1. Key custody arrangements addressed by the SEC proposal.
Crucially, SEC Commissioner Hester Peirce clarified that “self-custody” here refers to advisers acting as custodians for client assets themselves, not investors directly controlling their own private keys.
The proposal would allow advisers to self-custody client and fund crypto assets under limited circumstances, including when no permitted custodian is available, worth understanding alongside the broader custody landscape in 9 best crypto lending platforms in 2026. Specific conditions will be determined through rulemaking.
This Builds on a Year-Old No-Action Letter
One significant development is that the proposal builds on regulatory relief issued a year earlier. On September 30, 2025, SEC staff issued a no-action letter saying it wouldn’t recommend enforcement against advisers or funds that, under specified circumstances, maintained crypto assets with certain state-chartered trust companies.
The October 2026 proposal moves that from staff-level relief into formal Commission rulemaking, since no-action relief is based on a particular request’s facts, while a final rule establishes a broader framework.
Why State Trust Companies Could Gain Ground
The proposal would allow state trust companies to serve as custodians for client and fund crypto assets under specified conditions, potentially expanding the pool of institutions available.
This has been under SEC consideration for more than a year: the September 2025 letter addressed whether state-chartered trust companies could be treated as “banks” under the custody provisions, and the latest proposal establishes a formal framework around that arrangement.
Atkins Frames This as Updating Rules That Predate the Internet
Atkins said many areas of the custody rules under the Investment Advisers Act and Investment Company Act predate the internet and were designed around traditional assets.
He argued custodial capabilities for newly developed crypto assets can lag behind an asset’s deployment by months, creating compliance difficulties, a regulatory gap also explored in what the Clarity Act is and how it addresses crypto market structure.
Atkins described the custody framework, Regulation Crypto Assets, and transfer-agent modernization as three pillars of a unified regulatory architecture.
What This Could Mean for Regulated Funds
For registered investment companies and business development companies, the proposal could provide a defined framework for holding eligible crypto assets, with the SEC saying changes could let funds offer clients access to a wider range of crypto-related strategies.
That doesn’t mean funds would automatically offer additional products, since individual funds would still need to determine whether assets fit their mandates and risk controls. The proposal also distinguishes between crypto assets that are securities and other digital assets, applying provisions within the scope specified by the rulemaking.
Part of a Broader 2026 Regulatory Push
The custody rulemaking is one element of a broader series of crypto-related actions during 2026. Atkins pointed to the SEC staff’s December 2025 no-action letter concerning DTC’s voluntary securities-tokenization pilot and a January 2026 statement establishing a tokenization taxonomy.
In August, the SEC proposed Regulation Crypto Assets, including exemptions for offerings of up to $5 million over four years and up to $75 million per 12-month period, with that comment period ending October 20. The custody proposal addresses a different part of the market: how regulated advisers and funds can safely hold crypto assets once they’re part of an investment operation.
What Comes Next for the Proposal
The SEC will accept public comments for 60 days after publication in the Federal Register, giving advisers, fund managers, custodians, and crypto companies time to respond. The final rules could differ from the framework presented on October 1, and no effective date has been established since the proposal remains subject to the rulemaking process.
What this means for you: The SEC has proposed a dedicated framework for crypto custody by registered investment advisers and regulated funds. The proposal would permit certain self-custody arrangements, specifically advisers holding assets themselves under limited conditions, and allow state trust companies to serve as custodians, while also updating broader custody requirements. The proposal is not final, and public comments will remain open for 60 days after publication in the Federal Register.
This article is for informational purposes only and does not constitute financial, legal or investment advice. The SEC’s custody framework remains a proposal and may change before final adoption. The treatment of particular crypto assets and custody arrangements will depend on the final rules and applicable requirements.
