SEC Proposes Crypto Custody Rules for Advisers and Funds
The SEC would allow conditional adviser custody and eligible state trust companies to hold crypto assets, with safeguards and a 60-day comment period.
Key Notes
- The SEC proposes a tailored crypto custody framework for registered investment advisers and regulated funds, with public comments due 60 days after Federal Register publication.
- Advisers could hold client crypto themselves only when no eligible custodian is available, subject to quarterly checks and safeguarding requirements.
- Eligible state trust companies could serve as crypto custodians, with annual due diligence and segregation of client assets from their own holdings.
The US Securities and Exchange Commission has proposed a new framework for how investment advisers and regulated funds safeguard crypto assets. The plan would permit advisers to hold certain client assets themselves when an eligible custodian is unavailable, while expanding access to state trust companies.
The SEC announced the proposal on October 1. It covers registered investment advisers and regulated funds, including registered investment companies and business development companies. The changes remain proposed rules and have not taken effect.
Adviser Self-Custody Would Be a Conditional Option
Under the SEC’s fact sheet, an adviser would first have to determine that no permitted custodian is available to hold the particular crypto asset. It would reassess that determination quarterly after taking custody.
Commissioner Hester Peirce emphasized that the proposal uses “self-custody” to describe an adviser holding assets for clients. It is a different arrangement from an individual investor controlling a personal wallet without an intermediary.
The proposing release would require safeguards against unauthorized transfers, including joint authorization by at least two designated people. At least one would be a management person; for a regulated fund’s assets, that person would have to be a fund officer.
Advisers would also need asset-specific safeguarding expertise, controls for private keys and cybersecurity, and annual reviews of those systems. An independent accountant would prepare an internal control report within six months of initial self-custody and annually thereafter. Regulated fund boards would oversee the custody arrangement.
State Trust Companies Get a Dedicated Route
The proposal would expressly permit eligible state trust companies to custody advisory client and regulated fund crypto assets. Peirce’s statement says advisers or funds would need a reasonable basis, after due inquiry, to believe the provider has state banking authorization and appropriate written safeguarding procedures.
Those checks would take place before engagement and annually afterward. The SEC’s fact sheet also calls for review of the provider’s audited financial statements and internal control report, with client crypto assets segregated from the trust company’s own holdings.
Scope and Disclosures Remain Important
The proposing release preserves distinctions between assets covered by the two laws. The adviser custody provisions would apply to crypto assets that are funds or securities, including securities or similar investments in a regulated fund account. The fund custody provisions would cover securities and similar investments.
Recordkeeping and disclosure changes accompany the custody options. The SEC would amend Form ADV and Form N-CEN to collect additional information on crypto custody and tokenized fund shares, and allow certain records maintained on a crypto network to satisfy recordkeeping requirements under specified conditions.
Chairman Paul Atkins said existing rules were built around traditional assets and that custodial support for newly developed tokens can lag their launch by months. The proposal seeks to address that gap while retaining protections against theft, loss and misuse.
Public Comments Come Before Final Rules
The public comment period will run for 60 days after the proposing release is published in the Federal Register. That timetable starts with Federal Register publication, rather than automatically with the SEC’s October 1 announcement.
Atkins placed the custody initiative alongside the SEC’s August Regulation Crypto Assets proposal and its recent Innovation Exemption for tokenized stock trading. It follows other market reforms addressing blockchain records and longer trading hours.
For the adviser market, the proposal addresses a practical issue also reflected in CoinScreamer’s coverage of Schwab’s custody plans: giving clients direct crypto access requires arrangements for safeguarding the underlying assets. The final custody options and conditions will depend on the SEC’s rulemaking process.
Disclaimer: CoinScreamer is an independent media brand owned and operated by NuvexMedia LLC, publishing news, research, and market insights on digital assets and related technologies. NuvexMedia LLC invests in and collaborates with companies across the digital asset, blockchain, and technology sectors. These relationships do not influence CoinScreamer’s editorial coverage, and the publication maintains full editorial independence to provide accurate, timely, and objective information. © 2025 NuvexMedia LLC. All rights reserved. This content is for informational purposes only and should not be considered legal, tax, investment, financial, or other professional advice.
