SEC proposes crypto custody rule for investment advisers
The SEC proposed a rule that would give registered investment advisers and regulated funds a defined path to custody crypto assets, an asset class the current rules never contemplated. The move matters to anyone running an SEC-registered fund or advisory book that holds digital assets, because the existing “permitted custodian” regime was written for stock certificates and cash, not private keys.
- Proposal would amend custody rules under the Investment Advisers Act of 1940 and Investment Company Act of 1940
- Follows a December 2025 no-action letter to DTC on its tokenization pilot and an August 2026 Regulation Crypto Assets proposal
- Watch for the published rule text, comment period length and how “qualified custodian” gets redefined for crypto
Today’s proposal comes from the Securities and Exchange Commission, in a statement accompanying the proposed rule itself, which has not yet been released in full text. A “qualified custodian” is the entity, typically a bank or trust company, that current law requires advisers and funds to use to hold client assets safely. The statement says that requirement has left firms unable to find compliant custody for crypto assets that trade long before custodians are built to hold them.
The Custody Gap the SEC Says It Is Closing
The statement frames the problem bluntly: advisers and funds have been “guessing how to effect lawful custody of an asset class that their clients increasingly demand,” according to the document.
It also says the qualified-custodian requirement is the core sticking point, because “with newly developed crypto assets, custodial capabilities may lag an asset’s deployment by many months,” per the statement. The proposal is meant to give those firms a compliant pathway rather than leaving them to work around the gap informally.
A Wider Rulebook Rewrite, Not Just a Crypto Patch
The statement says the proposal also updates custody provisions that “have not been amended for decades,” affecting advisers and funds regardless of whether they touch crypto.
That means the rulemaking is bundled: crypto-specific custody rules sit alongside a general modernization of adviser and fund custody requirements. Firms will need to track both pieces once the full rule text is published.
Part of a Longer SEC Sequence
The statement lists prior steps it says lead to this proposal: a December 2025 no-action letter to the Depository Trust Company on its tokenization pilot, a January 2026 staff statement on tokenized securities, an April 2026 statement on broker-dealer registration for tokenized-securities interfaces, and an August 2026 proposal for Regulation Crypto Assets covering investment-contract token offerings.
It also cites a recent “Innovation Exemption” for trading tokenized NMS stock.
Commission staff issued a no-action letter to the Depository Trust Company regarding DTC’s voluntary securities tokenization pilot program.
SEC statement
None of those prior actions are rules with binding force comparable to today’s proposal; they were staff letters, statements or exemptions. This is the first item in the sequence framed as a formal rule proposal for custody itself.
What the Document Does Not Say
The statement does not publish the rule text, define what counts as a qualified custodian for crypto, or set a comment period deadline.
What Changes in Practice
Under the current regime, an adviser holding crypto on behalf of clients has had no codified custodian category built for digital assets. A finalized version of this proposal would let advisers point to a specific, SEC-sanctioned custody structure instead of relying on counsel’s interpretation of rules written before blockchain existed.
That shift lowers compliance risk for advisers who already hold spot crypto for clients and removes a barrier for funds that have avoided direct crypto custody over examination risk. It does not, on its own, change who can act as a custodian today, since that depends on rule text not yet public.
The CCS read. A proposal is not a rule. Until the SEC publishes text, sets a comment deadline and defines qualified custodian for crypto, advisers still have no new legal cover, only a signal that one is coming.
Watch for the SEC to publish the full proposed rule text and open a public comment period, the next step needed before any custody framework takes effect.