SEC proposes crypto custody framework for investment advisers and funds
The U.S. Securities and Exchange Commission has proposed rules allowing investment advisers and regulated funds to hold crypto assets through state trust companies or direct custody when qualified custodians are unavailable.
The U.S. Securities and Exchange Commission has proposed a new regulatory framework governing how registered investment advisers and regulated funds safeguard crypto assets. SEC Chairman Paul Atkins said the 760-page plan aims to provide a compliant pathway under custody regulations that largely predate the internet, noting that crypto has evolved from a niche curiosity into a multi-trillion-dollar asset class while U.S. regulation has not kept pace.[2][3][7][10][12][13]
Under the proposal, state-chartered trust companies would be permitted to serve as custodians if advisers verify their state authorization and written safeguarding policies. The framework also creates a fallback permitting advisers to hold client crypto directly when no qualified custodian is available to maintain the asset. Advisers would have to document that unavailability prior to taking custody and re-evaluate it every quarter, moving assets to an eligible custodian as soon as practicable once one becomes available. High custodian fees alone cannot serve as justification for advisers to hold the keys directly.[1][6][7][14]
Firms utilizing the direct custody fallback would face strict safeguards, including documented asset expertise, private key authorization requiring at least two designated people, segregated client addresses, and independent internal control reports. The SEC's economic analysis estimates annual direct custody costs at $433,833 per adviser, noting that the expense could deter smaller firms. Commissioner Hester Peirce emphasized that the measure involves advisers acting as custodians for clients rather than true investor self-custody. The proposal will remain open for public comment for 60 days following publication in the Federal Register.[2][6][7][9]
Key facts
- The SEC proposed a regulatory framework permitting investment advisers and regulated funds to custody crypto assets using state trust companies or direct self-custody in limited circumstances.
- Advisers may hold client crypto directly only if they establish that no permitted custodian is available, a determination that must be reassessed quarterly.
- Direct adviser custody requires key controls approved by at least two people, segregated client addresses, and annual independent internal control reports.
- The SEC's economic analysis estimates direct custody costs at $173,499 initially and $433,833 annually per adviser.
- SEC Chairman Paul Atkins stated the proposal provides a compliant pathway for crypto assets under custody rules that largely predate the internet.
- The 760-page regulatory release will be open for public comment for 60 days following publication in the Federal Register.
Sources · 14 sources
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DecryptArticle ·
SEC Proposes Rules to Clear Up How Advisers and Funds Can Hold Crypto The proposal would let advisers and funds use state trust companies as custodians and permit self-custody under certain conditions, aiming to replace years of ambiguity with a clear compliance path.
Open source - TW
The Wolf Of All Streets@scottmelkerPost on X ·
BREAKING: 🚨 The SEC has proposed a new regulatory framework for the custody of crypto assets by investment advisers and regulated funds. The proposal would allow self-custody of crypto assets in certain cases and permit state trust companies to serve as custodians. At the same time, it modernizes decades-old custody rules under the Investment Advisers Act and Investment Company Act that were designed for traditional assets. SEC Chair Paul Atkins said the rules would give advisers and funds "a compliant pathway where none existed before." The public comment period will run for 60 days after publication in the Federal Register. Crypto custody rules are finally being brought into the modern era.
Open source - TB
The Block@TheBlockCoPost on X ·
THE BLOCK: The SEC proposed a new regulatory framework for the custody of crypto assets by investment advisers and regulated funds, Chairman Paul Atkins said, aiming to provide a "compliant pathway" for holding digital assets under rules that largely predate the internet. The proposal would address a key gap for institutional investors, where qualified custodial infrastructure for some crypto assets may not yet exist, while also modernizing broader custody rules under the Investment Advisers Act and Investment Company Act.
Open source - BT
Bull Theory@BullTheoryioPost on X ·
BREAKING: 🇺🇸 The SEC has proposed new rules letting investment advisers and funds hold their clients' crypto themselves when no custodian is available. They will need strong security, regular audits and clear risk disclosures to do it. https://t.co/eAVEfVcu9m
Open source - CR
CryptoSlate@CryptoSlatePost on X ·
The SEC models $433,833 in annual costs for advisers using its proposed crypto custody fallback. That excludes some technology spending. Smaller firms may opt out. The option would apply when no qualified custodian will hold the asset. https://t.co/hA18Jijk5h
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CryptoSlateArticle ·
New SEC crypto rules threaten small advisers, but big firms win The US Securities and Exchange Commission’s proposed crypto custody fallback could broaden investment choices while making them easier for larger advisers to offer. The agency’s economic analysis says the expense of safeguarding assets and arranging independent oversight may lead smaller firms to decline to offer the service. Approved on Oct. 1, the proposal would let advisers hold covered client crypto assets when an eligible custodian is unavailable, subject to safeguards. Table 8 models certain annual costs of $433,833 per adviser using that option. That estimate includes an independent control report but leaves out some potentially significant technology costs. For clients, the consequence could be that an asset might become available through an adviser with sufficient custody resources while remaining outside another adviser’s offering. SEC Commissioner Hester Peirce distinguished adviser “self-custody” from investors holding their own assets . Here, an intermediary would hold clients' key materials, potentially including a non-controlling portion. Clients would still depend on that intermediary’s safeguards. For ordinary advisory clients, the adviser amendments concern crypto assets that are funds or securities, while the relevant scope for regulated-fund accounts is securities or similar investments. What the annual estimate includes The largest modeled annual component is the independent internal control report. The SEC puts its average cost at $376,000, alongside $57,833 in recurring internal compliance work. Table 8 combines those amounts and separately lists an initial internal compliance cost of $173,499, all in 2026 dollars. Modeled adviser cost Amount Timing Internal compliance work $173,499 Initial Internal compliance work $57,833 Recurring annually Independent internal control report $376,000 Annual estimate Table 8 adviser annual subtotal $433,833 Internal work plus control report The internal estimate assumes 300 initial hours and 100 recurring annual hours at $578.33 an hour. It covers information, communications, and an agreement between adviser and client to treat the asset as a financial asset under applicable state law. The subtotal leaves out some technology, software, hardware, and associated systems and processes. The SEC expects those costs to be economically high. Recordkeeping and disclosure burdens also appear separately in other tables, so the subtotal cannot serve as a complete operating budget. The accountant figure comes from an inflation-adjusted prior estimate in the Paperwork Reduction Act analysis, rounded to the nearest $1,000, reflecting the agency’s historical cost model. Report costs could vary with the assets, safeguarding systems, and expertise needed to check different networks. The agency assumes approximately 823 advisers, or 5% of 16,442 registered advisers, would use self-custody for that burden calculation. It cautions that actual uptake may be lower. Scale changes the cost of access The economic analysis explicitly anticipates that smaller advisers may elect against self-custody, while larger advisers could have sufficient resources to meet the safeguards. It also identifies ways to share some costs across a larger client base, multiple assets, or affiliated businesses. That creates a plausible advantage without establishing a universal minimum firm size. An adviser with substantial overall assets may have only a small pool of covered crypto assets needing this fallback. Conversely, an adviser with a focused crypto business may already have the expertise and infrastructure another firm would have to acquire. A shared cost weighs more heavily on a small pool of assets than a large one, if the burden stays constant. Firms could allocate costs across their wider businesses rather than charge only clients using the fallback. The SEC expects many direct costs could be passed on to clients through fees or expenses. More assets and more networks can require more complex controls and more specialized accountant work, increasing absolute costs. The potential benefit comes from spreading or reusing parts of the infrastructure. Accountant pricing could work either way: the SEC warns that demand for people who can assess crypto controls could make services harder to obtain, particularly for smaller advisers with less bargaining power. Related Reading Why millions of everyday savers will soon own Bitcoin without ever downloading a crypto app An option that can expire for each asset The proposed fallback would depend on the adviser having a written reasonable basis, after due inquiry, that no qualified custodian would maintain each asset. The adviser would need to make this determination before taking custody and at least quarterly afterward. Custodian costs could not form the basis of that determination. An adviser could not choose the fallback simply because its custody arrangement looked cheaper. The relevant barrier is the availability of an eligible custodian for the asset, assessed under the proposed conditions. Once an adviser learned that a qualified custodian had become available, it would have to place the asset with that custodian as soon as reasonably practicable. That obligation could arise between quarterly reviews. The proposal does not specify a single transfer deadline for every situation. A firm might incur costs to support an asset and later have to move it out of adviser custody. Eligibility could also leave the firm with only a narrow set of unsupported assets to spread the remaining expense across. If no client crypto assets remained in self-custody by the report’s due date, the report would not be required. That could reduce costs for a short-lived arrangement, although advisers retaining other covered client crypto assets in self-custody would still face the applicable obligation. Advisers could hold client crypto when qualified custody is unavailable, with recurring checks and oversight. The safeguards buy independent scrutiny The expense accompanies a change in who holds the assets. An adviser offering investment advice would also hold client key materials, creating risks of misuse, misappropriation and operational error. A lower-cost arrangement would have to be assessed alongside those risks. As SEC Commissioner Mark Uyeda’s statement explains, the proposed conditions include safeguarding expertise , cybersecurity protections, annual reviews, reporting and client disclosures. The adviser would need asset-specific expertise and systems for key management, authorization by two or more designated people, and segregation of each client’s assets. The first independent control report would be due within six months of taking self-custody and at least once each calendar year thereafter. It would assess the design, implementation and effectiveness of controls and include verification of reconciliation to the crypto network. That supplies scrutiny beyond an adviser’s assessment of its capability. Quarterly client reporting would also apply, with electronic alternatives and exceptions for qualifying audited pools and regulated funds. Clients’ visibility into balances and transactions can complement safeguards, while the accountant’s work addresses questions that a balance alone cannot settle. These protections would not eliminate custodial risk, and the SEC cautions that spending itself does not establish safeguarding competence. A firm’s ability to absorb compliance costs is a separate question from whether its systems effectively protect clients. Alternatives could soften the scale advantage SEC Commissioner Hester Peirce’s Sept. 30, 2025 statement described conditional staff no-action relief for certain state trust companies and identified national and state banks as other permissible custodians. The October proposal would also permit eligible state trust companies to custody crypto assets, subject to initial and annual due inquiry into authorization and safeguards. Where an eligible institution supports an asset, clients may gain access without their adviser building the proposed fallback arrangement. Its cost advantage would depend on the particular asset and custody arrangement, since a firm authorized to provide crypto custody does not necessarily maintain every asset a client wants to hold. The question for investors is whether the proposal would produce usable access at an acceptable cost and level of protection. The SEC’s analysis supports a possible advantage for advisers with sufficient resources and reusable infrastructure. How widely clients benefit would depend on firms’ actual implementation costs, independent-accountant pricing, and the assets that eligible custodians begin to support. The post New SEC crypto rules threaten small advisers, but big firms win appeared first on CryptoSlate .
Open source - UN
UnchainedArticle ·
SEC Proposes Letting Advisers and Funds Hold Client Crypto When No Custodian Can The Securities and Exchange Commission proposed rules on Thursday that would let registered investment advisers and regulated funds hold client crypto themselves when no approved custodian can, and would allow state trust companies to safeguard those assets. SEC Chairman Paul Atkins said in a statement that the plan is meant “to close a gap that has left investment advisers and funds guessing how to effect lawful custody of an asset class that their clients increasingly demand.” Current rules generally require advisers to keep client assets with a qualified custodian, such as a bank or a registered broker-dealer. Atkins said that “with newly developed crypto assets, custodial capabilities may lag an asset’s deployment by many months.” Get Unchained’s crypto news in your inbox with the free Unchained Daily newsletter . How Self-Custody Would Work An adviser could hold a client’s crypto only after concluding that no permitted custodian is available, and it would have to recheck that every quarter, according to the SEC’s fact sheet . It would also need documented expertise for each asset, private key controls requiring at least two people to approve any transaction, separate addresses for each client and outside accountant reports on its controls. Clients would get account statements at least quarterly. “The proposal uses the term in a way that does not reflect true self-custody by investors,” Commissioner Hester Peirce wrote in a statement , noting that it covers advisers acting as custodians for clients. Before hiring a state trust company, and each year after, an adviser or fund would need grounds to believe the firm holds state authorization to custody crypto and has written safeguarding policies, and client assets would have to be kept apart from the company’s own. “Allowing eligible state trust companies to serve as permitted crypto custodians would increase competition and expand investor protection and investment options,” Peirce wrote. The 760-page release will be open for public comment for 60 days after it is published in the Federal Register. A Second Attempt Commissioner Mark Uyeda said in a statement that an earlier custody proposal, from 2023, had built a “no-win” scenario for crypto. The agency withdrew that plan in June 2025. “Rules that are unworkable in practice will not protect investors but merely provide the illusion of protection,” Uyeda said. The proposal comes two weeks after the SEC granted an exemption for onchain trading of tokenized stocks, and after Atkins and CFTC Chairman Michael Selig pledged to write crypto rules under existing authority once the Clarity Act stalled in the Senate. Peirce, who led the SEC’s Crypto Task Force, has set Friday as her last day at the agency. “More regulatory proposals are on the horizon,” Atkins said. Related Listen: Crypto’s Clarity Act Collapses. Two Days Later, the SEC Introduces Its Innovation Exemption The post SEC Proposes Letting Advisers and Funds Hold Client Crypto When No Custodian Can appeared first on Unchained .
Open source - LS
Laura Shin@laurashinPost on X ·
SEC Chair Paul Atkins said the new custody proposal aims to close a gap that left advisers and funds "guessing how to effect lawful custody" of crypto. Conditions include a quarterly check for an available custodian and sign-off from at least two people on transactions. https://t.co/FkuZqG5oux
Open source - CO
CoindeskArticle ·
SEC proposes new crypto custody rules for investment advisers and funds The regulator issued a proposed rule for custody, marking a swan song for its inaugural Crypto Task Force chief, Commissioner Hester Peirce, who exits this week.
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BSCN@BSCNewsPost on X ·
SEC Chairman says regulation has not kept pace with crypto... @SECGov Chair @SECPaulSAtkins admitted that US regulation has "not kept pace" with the now multi-trillion dollar blockchain sector. Hs admission came as the SEC proposed a whole new set of rules and framework for the custody of crypto assets for registered investment advisers and regulated funds.
Open source - TB
The BlockArticle ·
SEC proposes framework allowing investment advisers, funds to self-custody crypto SEC proposed a crypto framework for investment advisers & funds, allowing self-custody in some cases & state trust companies as custodians.
Open source - BM
Bitcoin Magazine@BitcoinMagazinePost on X ·
JUST IN: 🇺🇸 SEC Chairman Paul Atkins releases a statement to address the custody of crypto assets. 👀 "Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class" 🚀 https://t.co/SbLR2HAeW1
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CoinMarketCap@CoinMarketCapPost on X ·
LATEST: 🇺🇸 The SEC has proposed a regulatory framework for investment advisers and funds to custody crypto assets, which Chair Paul Atkins says gives them "a compliant pathway where none existed before." https://t.co/gegnyfZJRD
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Lark Davis@LarkDavisPost on X ·
The SEC just proposed major custody rule changes for crypto advisers: • Advisers may hold client crypto themselves if no permitted custodian is available, subject to strict safeguards and quarterly rechecks • State-chartered trust companies can serve as crypto custodians if they meet set conditions • 60-day public comment period starts once the release hits the Federal Register The CLARITY Act might have been pushed into limbo, but it wasn't the only game in town.
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