SEC proposes crypto custody rules allowing self-custody and state trust companies

The Securities and Exchange Commission proposed new rules Thursday that would create a dedicated framework for how registered investment advisers and regulated funds can custody crypto assets.

The proposal would allow advisers and funds to hold crypto in self-custody under certain circumstances and permit state trust companies to serve as custodians for client and fund crypto assets.

The changes would apply under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 and are intended to update custody requirements that were largely designed before digital assets existed.

SEC Chairman Paul Atkins said the current framework has left investment advisers and funds uncertain about how to lawfully custody an asset class increasingly requested by clients.

“Today’s proposal would provide a clear regulatory framework for the custody of crypto assets,” Atkins said, arguing that existing rules have not kept pace with the growth of the market.

Under the proposal, advisers could use self-custody when specific conditions are satisfied, addressing situations where a suitable third-party qualified custodian may not be available. State-chartered trust companies could also qualify to hold crypto assets under the framework.

The SEC said the changes could allow regulated funds, including registered investment companies and business development companies, to offer a broader range of crypto-related strategies while remaining subject to federal custody requirements.

The proposal would also update requirements covering financial statement audits for registered investment advisers and broker-dealer custodial services for regulated funds.

The move forms part of a broader series of crypto rulemaking initiatives from the SEC this year. The agency has also proposed Regulation Crypto Assets, introduced an innovation exemption for certain tokenized securities trading and issued guidance covering the classification of crypto assets.

The custody rules are not yet final. The proposal, filed as S7-2026-35, will remain open for public comment for 60 days after publication in the Federal Register.