Certain crypto assets have remained off-limits for some clients because of strict custody rules, but a new SEC proposal could finally clear that regulatory hurdle.
Rules overseeing how investment funds and advisers store crypto are facing a proposed easing from the SEC, which could finally remove a major regulatory hurdle that has kept firms from offering digital assets to clients.
Published on Thursday, the proposal would allow investment advisers to handle clients’ digital holdings themselves if a qualified custodian cannot be found, subject to specific conditions, while also permitting state trust companies to act as crypto custodians.
“The crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace,”
US Securities and Exchange Commission Chair Paul Atkins said in a statement.
Aiming at a practical obstacle in digital asset investing, the proposal addresses how investment advisers frequently struggle to find a qualified custodian for specific tokens, thereby limiting the options that can be provided to clients.
Prior concerns regarding a shortage of qualified crypto custodians were previously voiced by The Digital Chamber, noting in a May 2025 filing with the SEC that certain advisers had declined token allocations or asked portfolio companies to hold them until proper custody was found.
Speaking in a Thursday statement, SEC Commissioner Hester Peirce compared the uncertainty to a regulatory roller coaster, noting that advisers have been gritting their teeth and holding on for dear life while a workable custody framework is awaited.
Self-Custody Plans Would Include Safeguards
Under the SEC plan, advisers wanting to store client crypto directly would be required to prove that no approved custodian exists for each token and recheck that status every quarter, while the assets would have to be moved promptly once a qualified custodian becomes available.
Executing self-custody would also demand tight safeguards around private keys, cybersecurity, and client asset separation, while any transfer of a self-held crypto token would have to be approved by at least two authorized persons.
Marking adviser custody as a source of inherent conflict, SEC Commissioner Mark Uyeda noted that the proposal acknowledged this issue, while adding that fiduciary obligations would still be enforced when clients’ crypto is held by advisers.
Regulated funds would also be permitted to keep crypto assets in self-custody alongside their investment adviser, provided the self-custody standards are met by the adviser and the arrangement is overseen by the fund’s board.
State-Chartered Trust Company Option
Employing a state trust company—defined as a financial entity chartered by a US state to manage assets for others—would carry distinct conditions.
These conditions involve verifying that authorization to provide crypto custody is granted by the relevant state authority, ensuring reasonable procedures are maintained to protect crypto assets from loss, theft, or misappropriation, requiring audited financial statements and internal control reports to be provided, and guaranteeing that client holdings are kept separate from the company’s own assets.
Adjustments to audit, recordkeeping, and disclosure rules are also introduced in the package, and public feedback will be welcomed by the SEC during a 60-day window following its publication in the Federal Register.
Building on recent efforts by the SEC and the Commodity Futures Trading Commission to establish sharper crypto guidelines through existing authorities, this fresh proposal follows the Senate stall of the CLARITY Act last month, while a crypto-market plan has been submitted by the CFTC for White House review and a pathway for trading tokenized stocks has been opened by the SEC.
