SEC proposes new crypto custody rules for investment advisers and funds
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Summary
The U.S. Securities and Exchange Commission (SEC) proposed a new crypto custody rule on October 1, 2026, aimed at clarifying how investment advisers and funds can hold and handle client crypto assets. The rule introduces a regulatory framework that includes allowing advisers to self-custody client funds in limited situations when no qualified custodian is available. This proposal is part of the SEC's broader digital asset agenda, following recent releases of the Innovation Exemption and Regulation Crypto Asset.
Why it matters
The SEC states that the new custody rule replaces outdated regulations designed for traditional assets, offering clarity and compliance pathways in the crypto space. It seeks to protect client assets from loss or misuse while updating custody rules to reflect current digital asset realities. The proposal addresses industry practices and auditing requirements, potentially enhancing investor protection and market integrity.
Key context
Previous SEC custody rules were tailored to traditional financial assets and did not adequately cover crypto assets, leading to regulatory uncertainty. The SEC’s Crypto Task Force has been working on crypto-specific regulations, with Commissioner Hester Peirce leading until her departure on October 2, 2026. This custody rule complements earlier regulatory advances such as the Innovation Exemption for tokenized securities and Regulation Crypto Asset for digital fundraising.
Key numbers and entities
The proposal document spans 760 pages. SEC Chairman Paul Atkins issued statements about the rule. Commissioner Hester Peirce, who led the Crypto Task Force, is leaving the SEC to become a professor in Virginia. The SEC recently adjusted quorum rules from three commissioners to two.
What remains unclear
The source does not specify detailed criteria for adviser expertise in self-custody nor the exact auditing and recordkeeping requirements. It is not clear how frequently or under what conditions state-chartered trusts would be authorized as custodians. The impact of reduced SEC commissioner numbers on crypto regulatory decision-making is also not fully explained.