Washington D.C., Oct. 1, 2026 — The Securities and Exchange Commission today proposed new rules and amendments to provide a tailored framework for the custody of crypto assets for registered investment advisers and regulated funds, i.e. registered investment companies and business development companies.
The Commission’s proposal would modernize custody rules and expand investor choice by removing regulatory barriers that inhibit the adviser’s ability to provide crypto-related investment advice. It would also allow regulated funds to offer clients access to a wider range of crypto asset-related investment strategies.
“Since the advent of Bitcoin in 2008, 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. To that end, today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before—and replacing the grey of uncertainty created by custody rules crafted for a bygone era,” said SEC Chairman Paul S. Atkins in a statement.
The proposed rules and amendments under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 would better address current industry practices and update a number of requirements relating to, among other things, financial statement audits for registered investment advisers and broker-dealer custodial services for regulated funds. The proposal would also permit crypto assets to be held in self-custody under certain circumstances and allow the use of state trust companies as custodians for client and regulated fund crypto assets.
The regulatory landscape surrounding digital assets has long been a subject of intense discussion among market participants, legal scholars, and regulatory bodies alike. For well over a decade, the digital asset ecosystem has evolved at a breathtaking pace, expanding from a decentralized peer-to-peer electronic cash system into a sprawling digital economy encompassing decentralized finance, tokenized real-world assets, and complex institutional financial products. Institutional investors, family offices, pension funds, and everyday retail investors have increasingly sought professional guidance and diversified portfolio exposure through regulated financial intermediaries. However, market participants have frequently cited the absence of a clear, modern regulatory structure for asset safekeeping as a primary hurdle preventing deeper institutional adoption and comprehensive product offerings.
Under existing frameworks, financial professionals operating within the traditional securities infrastructure have often navigated an ambiguous environment when attempting to hold or manage digital tokens on behalf of clients. Custody rules, which were originally conceptualized and refined during eras dominated by physical certificates, paper equities, and centralized clearinghouses, often struggled to accommodate the cryptographic realities of public blockchains, private keys, and decentralized networks. The latest action by the Commission aims to bridge this historical gap by formally addressing the unique technological characteristics of digital instruments while maintaining robust investor protection standards.
Chairman Atkins emphasized the necessity of adapting regulatory oversight to match the realities of modern financial markets. In his remarks accompanying the announcement, he underscored that the historical lack of a definitive compliance pathway forced many market participants to operate in regulatory gray areas, creating unnecessary compliance risks and limiting the ability of investment professionals to properly service their clientele. By establishing explicit standards for how digital assets are safeguarded, accounted for, and audited, the proposed framework seeks to bring much-needed clarity to an industry that has matured significantly since the early days of digital currency innovation.
The sweeping set of proposals touches upon several key operational components governed by the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Among the most notable updates are targeted revisions to financial statement audit requirements tailored specifically for registered investment advisers dealing in digital holdings. Furthermore, the amendments address longstanding questions regarding the types of financial institutions permitted to act as qualified custodians. While traditional broker-dealer custodial services have formed the baseline for regulated funds, the newly proposed provisions broaden the operational scope by explicitly accommodating alternative institutional arrangements under carefully defined parameters.
Notably, the proposal introduces provisions that would permit crypto assets to be held in self-custody under certain specific circumstances, acknowledging that certain digital asset structures and institutional risk-management models may rely on direct control of cryptographic keys rather than third-party intermediaries. Additionally, the regulatory text accommodates the use of state trust companies as qualified custodians for both client accounts and regulated fund holdings. This expansion is expected to provide investment managers with greater operational flexibility, allowing them to partner with specialized financial institutions equipped with the technological infrastructure required to secure digital property safely and efficiently.
Industry stakeholders, legal experts, compliance professionals, and investor advocacy groups are now poised to review the comprehensive text of the proposing release. Because regulatory changes of this magnitude carry profound implications for portfolio management, operational compliance, and market structure, the feedback gathered during the rulemaking process is anticipated to be extensive and multifaceted. Market participants will have ample opportunity to evaluate the technical specifications of the proposed mandates and submit formal feedback to the Commission regarding how the framework impacts daily operations and long-term strategic planning.
The public comment period will remain open for 60 days following the publication of the SEC’s proposing release in the Federal Register. During this window, interested parties can review the detailed statutory adjustments, analyze the compliance burdens and economic impacts, and provide constructive commentary to help shape the final rules. Following the close of the comment period, Commission staff will review the submissions, weigh potential modifications, and prepare a final rule package for consideration and eventual voting by the agency, marking a potentially historic milestone in the integration of digital assets into the formal regulatory architecture of the United States capital markets.
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