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TL;DR
- The SEC has proposed a dedicated custody framework for crypto assets held by registered investment advisers and regulated funds.
- The proposal would allow self-custody in limited circumstances and permit state trust companies to act as custodians subject to conditions.
- Nothing changes immediately: the proposal still has to pass through a public comment and rulemaking process.
The US Securities and Exchange Commission has put a much more concrete version of crypto custody reform on the table.
In a proposal published October 1, the regulator said it wants to create a tailored framework for registered investment advisers and regulated funds holding crypto assets. The plan reaches into both the Investment Advisers Act and the Investment Company Act, and it tries to solve a problem that has followed institutional crypto adoption for years: the rules were built around traditional securities and traditional custodians, while digital assets do not always fit neatly into either category.
The SEC is not simply declaring that funds can hold anything however they like. Instead, it is proposing new routes for compliant custody.
Self-custody could become possible in narrow cases
One of the biggest changes is a proposed route for advisers and regulated funds to self-custody crypto assets when specified conditions are met. Commissioner Hester Peirce said the option would be available only in limited circumstances, including when an adviser determines that no permitted custodian is available for a particular asset and continues to reassess that conclusion.
The proposal would also allow state trust companies to serve as custodians for client and fund crypto assets, again subject to conditions.
That is a meaningful change from the regulatory uncertainty that has made custody one of the awkward parts of offering crypto exposure through conventional investment products. The proposal sits beside the SEC’s Regulation Crypto Assets proposal and its work on a clearer digital-asset taxonomy.
The old custody problem has become harder to ignore
Crypto funds do not only need a place to store an asset. They need a legal framework around control of private keys, segregation of client assets, audits, trading authority and the use of third-party service providers.
Chairman Paul Atkins said existing rules have not kept pace with an asset class that has grown into a multi-trillion-dollar market. The proposal also includes broader custody-rule changes covering areas such as adviser audits and broker-dealer custodial services for regulated funds.
It arrives as more traditional firms are building direct exposure to digital assets. That institutionalisation is also showing up in the trading layer, where NewsBTC recently reported that institutions accounted for 72% of Wintermute’s spot OTC volume.
This is still a proposal
The timing is important. The SEC has proposed the rules; it has not adopted them.
A 60-day public comment period will begin after publication in the Federal Register. The final version could change significantly depending on industry feedback, legal concerns and the Commission’s own review.
For now, the clearest signal is that crypto custody is moving from improvised guidance toward purpose-built rulemaking. For advisers and funds that have spent years trying to fit digital assets into a framework designed before blockchains existed, that alone is a notable change.
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This article was written by the News Desk and edited by Samuel Rae.
