The Securities and Exchange Commission on Thursday proposed new rules that would give registered investment advisers and regulated funds a defined path for holding client crypto assets, including limited self-custody and the use of state-chartered trust companies as custodians.
The proposal, published Thursday afternoon, runs to 760 pages and amends the Investment Advisers Act of 1940 and the Investment Company Act of 1940. It is the first time the agency has written custody rules that treat crypto assets as their own category rather than forcing them into a framework built for stocks and bonds held at banks.
SEC Chairman Paul Atkins said in a statement that the current rules leave advisers without a compliant way to hold digital assets, which pushes clients toward offshore or unregulated service providers and leaves the SEC with less visibility into who actually holds the keys to client money.
“Today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before, and replacing the grey of uncertainty created by custody rules crafted for a bygone era,” Atkins said.
What changes for advisers
Under the existing custody rule from 2009, most registered advisers had to route client crypto through a qualified custodian such as a bank or broker-dealer, and many crypto-native firms did not fit those definitions. The mismatch meant a large share of the asset management industry simply could not offer crypto exposure directly, even when clients asked for it, and the firms that did had to build workarounds that regulators never formally blessed.
The new proposal would let advisers self-custody client crypto in certain circumstances, a real shift given the agency’s past stance that adviser self-custody is generally off-limits. The rule text sets conditions around key management, security practices and bankruptcy protections, and advisers would need to document that they meet them before taking custody. An adviser that fails a security audit or cannot prove segregation of client keys would stay on the qualified-custodian route.
State trust companies would also qualify as custodians. That matters because companies like Gemini, BitGo and Fidelity Digital Assets built their custody businesses as state-chartered trusts in New York or South Dakota, structures the old rule never clearly recognized. Several of them have spent years operating on legal opinion letters instead of a clear rule, and each new adviser client meant another round of diligence over the same question.
The SEC frames the changes as investor protection. Adapting rules written for securities held at banks to private keys held on-chain, the agency argues, left advisers guessing, and the gaps were filled in practice by lawyers rather than regulation. The Commission also points out that the old rule predates crypto entirely, and that enforcement actions against advisers became the only way to signal what was allowed.
Comment period and timing
The proposal is open for public comment for 60 days. Final adoption would follow a review of comments and a second Commission vote, so the rules are months away at the earliest, and exchanges and industry groups are already signaling they will push for changes to the self-custody conditions.
The release comes in the final week for Commissioner Hester Peirce, who led the agency’s Crypto Task Force and exits this week. The task force ran workshops through 2025 and 2026 on custody, tokenization and trading venues, and the custody proposal draws directly on that work. Peirce had argued publicly that the old custody rule effectively told advisers to leave crypto alone, and called the guidance gap the single biggest blocker to institutional participation.
Market reaction
The proposal landed on a day when the broader crypto market stayed flat. Bitcoin traded near $83,700, inside the $82,000 to $85,000 range it has held for more than a week, and ether sat close to $2,690. Total crypto market capitalization held near $2.96 trillion.
Institutional flows have been the market’s main story this week. Digital asset funds took in $3.55 billion last week, the strongest week of 2026, and a custody framework for advisers is the kind of infrastructure question those flows depend on. US spot bitcoin ETFs, which pulled in $3.08 billion over a nine-day streak through Tuesday, saw $148.7 million of outflows on Wednesday, the first break in that run.
Several custody providers and trade groups are expected to file comment letters. Past comments on crypto rulemakings have argued that qualified custodian status for state trusts should be automatic, and the new proposal appears to accept that argument at least in part.
What it does not cover
The proposal governs advisers and registered funds only. It does not create rules for exchanges, brokers or consumer platforms, and it does not settle how tokens are classified as securities in the first place. Those questions sit with pending market structure legislation and separate SEC projects, including the tokenized stock exemption announced earlier this week that lets approved venues trade on-chain versions of listed US stocks.
The GENIUS Act stablecoin framework and a Treasury rule published Wednesday cover payment stablecoins through a separate track, setting a two-business-day redemption standard and a certification process for state regulators. The custody proposal is the SEC’s piece of that broader regulatory build-out, and the two tracks rarely touch each other.
For advisory firms, the practical effect lands later. Compliance teams now have a text to build against, but nothing binding until the final rule. In the meantime, the current custody rule still applies, and advisers continue to route crypto through the same handful of custodians they used yesterday. The bigger question is whether the final text keeps the self-custody allowance or strips it out under industry pressure, since that single provision does the most to change who can hold crypto without a middleman.