On October 1, 2026, the Securities and Exchange Commission proposed new rules for how registered investment advisers and regulated funds may hold crypto assets. The draft would let advisers keep some client coins in self-custody, add state trust companies to the list of permitted custodians, and rewrite custody requirements that have not changed in decades.
The proposal hands advisers and funds a documented path to hold crypto they already advise on. Three changes carry the most weight. An adviser could keep certain client crypto in self-custody, controlling the private keys itself, if it meets specific conditions. A state-chartered trust company could act as a permitted custodian, which widens the field beyond banks and broker-dealers. The SEC would also refresh the older custody rules, including financial statement audits for advisers and the broker-dealer custodial services that regulated funds lean on. The framework is a proposal, not a final rule. Nothing changes for investors until the agency finishes the rulemaking. The first real step is a 60-day public comment window, which opens when the full text lands in the Federal Register and gives the public a chance to push back before anything is fixed in place.
A custody framework built for tokens
The current custody rules were written for a different market. Chairman Paul S. Atkins said the rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 predate the internet and contemplate the safekeeping of traditional assets only.
A key protection in those rules is the required use of permitted custodians. With crypto, that list has been thin. Custodial support for a new token can arrive months after the token starts trading, which leaves an adviser holding a client request it cannot lawfully fill. The SEC’s announcement frames the proposal as a fix for that gap, a compliant route where none existed before.
Atkins placed the draft inside a wider agenda. He pointed to a December 2025 no-action letter to the Depository Trust Company about its tokenization pilot and a January 2026 staff statement that set out a tokenization taxonomy. His written statement argues the custody rules are the last piece that had not been modernized.
Which firms must follow the framework?
The proposal reaches two groups. The first is registered investment advisers, which owe clients a duty of care and already work under a custody rule. The second is regulated funds, defined here as registered investment companies and business development companies.
It does not cover ordinary retail brokerage accounts. Someone who buys a small amount of Bitcoin through a consumer app is not the audience for this rule. The audience is the professional who moves other people’s money. That distinction matters because the draft changes where a fiduciary may park client assets, not where a person stores personal coins.
The SEC has been building the wider framework for months. Its August proposal on crypto asset offerings set rules for how tokens are issued and sold. This one follows the money into the account where those tokens sit.
Where can an adviser keep client coins?
The draft keeps the familiar custodians and adds new ones. Banks, savings associations, registered broker-dealers and registered futures commission merchants already qualify. The proposal would let state-chartered trust companies join that group, and it would allow self-custody when the adviser can show it protects the keys.
The expansion addresses a practical snag. A crypto asset can trade on a public blockchain long before any qualified custodian supports it, so an adviser that wants early exposure has nowhere compliant to store it. Adding state trust companies gives advisers more than one type of firm to call.
| Custody Route | Key Holder | Status In The Proposal |
|---|---|---|
| Adviser Self-Custody | The Adviser | Allowed With Conditions |
| Bank Or Trust Bank | A Chartered Bank | Longstanding Option |
| State Trust Company | A State Trust Firm | Added By The Proposal |
| Broker-Dealer | A Registered Firm | Used Mainly By Funds |
Self-custody and the state trust company route
Self-custody is the part worth reading closely. The release says crypto assets could be held in self-custody under certain circumstances, and those conditions are where the detail lives. A firm that holds its own keys takes on risks a bank custodian would otherwise absorb, including lost keys, hacking and the chance that one employee controls access.
The investor.gov bulletin on crypto custody walks through the same trade-off for individuals. It separates self-custody from third-party custody and notes that a lost private key or seed phrase can mean permanent loss, while a custodian that fails can also cut off access. The counterparty side of that question is why exchange risk gets so much attention.
A state trust company is supervised, but it is not a bank. It does not carry federal deposit insurance, so the protection a client receives depends on the trust charter and the state that grants it. That is the detail a fund board will weigh when it decides whether to use one.
Audit and recordkeeping changes
Custody rules have not kept pace on the paperwork either. The proposal would update requirements for financial statement audits of registered investment advisers and for the broker-dealer custodial services that regulated funds use.
Atkins said those provisions have not been amended for decades, and the goal is to make them fit for purpose and closer to current industry practice. For a fund, an audit is the main outside check on whether the assets a manager reports are actually there. Modernizing that step can change how much verification a fund’s investors can see.
What does the 60-day comment window mean?
The public gets 60 days to respond, counted from the date the full proposing release reaches the Federal Register. The press release states the direction. The release carries the rule text, the questions the SEC wants answered and its estimates of cost.
Anyone may read the material and file a comment through the SEC’s rulemaking docket. The custody bulletin is a plain-language starting point for the concepts the rule leans on.
For a regular investor, the practical point is timing. A proposal does not move the coins in a personal account. It can change what a fund is allowed to buy and how the adviser managing it is allowed to hold the assets, and those effects arrive only when the rule becomes final.
How regulated funds fit in
The draft would let regulated funds offer a wider range of crypto-related strategies. A registered investment company is the wrapper behind many mutual funds and ETFs. A business development company is a different structure, aimed at private firms and, in this setting, crypto-linked ventures.
Today a fund that wants crypto exposure often buys a proxy, such as an equity stake in a miner or an exchange. A clearer custody path may let some funds hold the asset directly, within their own investment limits and subject to board approval.
The proposal guarantees no specific product. It removes a legal obstacle, and the market decides what gets built on top.
The gaps the proposal leaves open
The draft answers the custody question, not every question around it. Because it is a proposal, the self-custody conditions, the treatment of state trust companies and the audit language can all change before the rule is final.
Tax treatment sits outside it. How a fund or an adviser reports crypto gains belongs to a separate body of rules, which our crypto tax guide covers.
The proposal also inherits the limits of the rules it edits. It governs professionals, not the retail accounts where most people first meet crypto. A compliant route to hold an asset is not the same as a reason to own it. The earlier offering proposal shows how long the wider framework has been in motion.