The US Securities and Exchange Commission is proposing the biggest rewrite of its custody rules in years, and the part drawing attention is crypto. Under the proposal, registered investment advisers could in limited circumstances hold client crypto assets themselves, and both advisers and regulated funds could use state trust companies as custodians.
Two things need saying before anything else. This is a proposal, not a final rule, so nobody can self-custody client crypto under it today. And the deadline that matters right now is the comment window, which closes December 7, 2026.
The paperwork first
The proposal is file number S7-2026-35, release IA-7023 and IC-36353. The SEC issued it on October 1, 2026, it was published in the Federal Register on October 6, 2026, and public comments are due December 7, 2026, per the SEC’s rulemaking page. It covers two regimes at once: the custody rule for registered investment advisers under the Advisers Act, and custody requirements for regulated funds under the Investment Company Act.
What it would actually change
Adviser self-custody, with conditions
Under the proposal, an adviser could hold a client’s crypto assets itself only if it determines, before taking custody and at least quarterly afterwards, that no permitted custodian is available to hold those assets. The conditions attached are substantial, according to Vedder Price’s summary of the release: safeguarding systems and cybersecurity controls that are reviewed annually, segregation of each client’s crypto from other clients’ assets, internal control reports from an independent public accountant, quarterly account statements to affected clients, and a written agreement treating the assets as a “financial asset” under state law.
Funds, with board oversight
A new Investment Company Act custody rule would let a regulated fund keep crypto in self-custody through its adviser, provided the adviser meets the adviser-level conditions and the fund’s board oversees the arrangement. Before the adviser takes custody, the board, including a majority of independent directors, would have to review the adviser’s custodian-availability determination and keep reviewing it quarterly, and determine that the assets would receive reasonable care, revisiting that annually.
State trust companies as custodians
The proposal would also let advisers and funds hold crypto with certain state trust companies. Before engaging one, and annually after, the adviser or fund would need to do due diligence establishing that the trust company is authorised by its state banking authority to provide crypto custody and maintains written safeguarding policies, review its audited financial statements and internal control report, and confirm that client crypto is segregated.
Housekeeping across the whole custody framework
Separately from crypto, the release proposes modernising the existing custody rules for current practice, amending related reporting and recordkeeping requirements, and redesignating the Advisers Act custody rule.
What this means if you are not an adviser
Very little directly, and that is the honest answer. This proposal governs how regulated professionals hold other people’s assets. It does not change how an individual holds their own crypto, it does not create insurance, and it does not make any particular exchange or custodian safe. If you hold crypto yourself, the security questions that matter are still key management and withdrawal hygiene, some of which we covered in our guide to wallet safety after a major exchange hack.
What to watch next
- December 7, 2026: the comment deadline. Comments are public, and industry submissions are usually where the substantive arguments show up.
- Any revision or adoption order: until the SEC adopts a final rule, the current custody requirements apply unchanged.
- State trust company licensing: the proposal leans on state banking regulators, so how states treat crypto custody charters becomes part of the practical story.
Not investment advice
This article describes a regulatory proposal. It is not investment, legal or tax advice, and it makes no prediction about crypto prices. Crypto assets are volatile and can lose value quickly; regulatory changes can move markets in either direction and often do so before the rules are final. Date every claim you read on this subject, including the ones here, to the documents linked below.
Sources
- SEC: Adviser and Regulated Fund Custody Rules; Crypto Custody Rules (S7-2026-35), issued October 1, 2026, comments due December 7, 2026.
- Vedder Price: SEC Proposes Crypto Asset Custody Framework for Investment Advisers and Regulated Funds, JD Supra, November 9, 2026.
- Federal Register: Adviser and Regulated Fund Custody Rules; Crypto Custody Rules, published October 6, 2026.
