SEC Proposes New Crypto Custody Rules for Investment Advisers and Funds

On October 1, 2026, the SEC proposed a tailored custody framework for crypto assets held by registered investment advisers and regulated funds, amending the custody rule under the Investment Advisers Act and the corresponding rules under the Investment Company Act (Rel. No. 2026-100).

 

Three features stand out. The definition of qualified custodian would expand to include state-chartered trust companies meeting specified conditions. Self-custody would be available, but only where no qualified custodian is reasonably available for the particular asset and the adviser has the expertise to hold it safely — with a quarterly obligation to reassess whether a custodian has since become available. The proposal also revises the audit and examination requirements for advisers and addresses broker-dealer custodial arrangements for regulated funds.

This is a proposal, not a final rule. Comments are due 60 days after Federal Register publication. Advisers currently relying on no-action positions or bespoke arrangements may want to read the release with their existing custody documentation side by side, since the recordkeeping and disclosure provisions, not the headline self-custody option, are where most firms will feel the change.

What the SEC Is Proposing

The SEC is proposing new rules and amendments under the Investment Advisers Act and Investment Company Act designed to address how investment advisers and regulated funds safeguard crypto assets. The proposal would also modernize portions of the existing custody framework to reflect current market practices.

Who Would Be Affected

The proposal is particularly relevant to registered investment advisers, registered investment companies, business development companies, and firms providing custody services for crypto assets.

Crypto Self-Custody Could Be Allowed in Limited Circumstances

One of the most significant changes would allow advisers and regulated funds to self-custody certain crypto assets when specified conditions are satisfied. Among those conditions, an adviser would need to determine that no permitted custodian is available to maintain the asset and periodically reassess that determination.

State Trust Companies Could Play a Larger Role

The proposal would allow qualifying state-chartered trust companies to serve as permitted custodians for client and regulated fund crypto assets. This could expand the range of institutions available to advisers and funds seeking compliant crypto custody arrangements.

Traditional Custody Rules Would Also Be Updated

Beyond crypto, the proposal includes broader custody changes involving areas such as broker-dealer custodial services for regulated funds, financial statement audits, discretionary trading, and certain independent verification requirements.

What Investment Advisers and Funds Should Review

Advisers and funds considering crypto strategies should review their existing custody arrangements, available custodians, safeguarding controls, cybersecurity procedures, asset segregation practices, and internal compliance policies. Because the rules are still proposed, firms should continue following existing requirements while monitoring the rulemaking process.

How SJKP Can Help

SJKP can assist investment advisers, funds, and financial firms with securities compliance, investment management matters, digital asset regulation, and evolving SEC requirements. Firms considering crypto investment strategies can work with counsel to evaluate custody arrangements and prepare for potential changes to the federal regulatory framework.