The Securities and Exchange Commission on October 1 proposed new rules on how registered investment advisers and regulated funds may hold crypto assets. The proposal is not law: nothing in it takes effect unless the Commission adopts a final rule.
What the rules require today
Advisers who hold client funds or securities must keep them with a "qualified custodian" — under the current rule, a bank or savings association, broker-dealer, futures commission merchant, or certain foreign financial institutions. Regulated funds — registered investment companies and business development companies — must use specified custodians such as banks, exchange-member broker-dealers and securities depositories. The SEC says these rules were "designed to address safekeeping of traditional assets," and that few traditional custodians have offered robust custodial services for a substantial range of crypto assets, which it says can make a permitted custodian hard or prohibitively expensive to find for some.
What the proposal would change
The SEC proposes two new paths. A "self-custody" option would let an adviser hold a client's or fund's crypto assets itself — holding the private keys — if the adviser determines in writing, initially and at least quarterly, that it has a reasonable basis, after due inquiry, for believing no qualified custodian will hold the asset; documents its safeguarding expertise; has at least two people, one of them a management person, jointly authorize any transfer; reviews its safeguarding systems and cybersecurity controls annually; sends clients account statements at least quarterly; and obtains an internal control report within six months of taking custody, then annually. A fund's board would have to find, initially and annually, that the asset "will be subject to reasonable care" with the adviser, and review the adviser's written determination quarterly.
Separately, state-chartered limited purpose trust companies could act as permitted custodians. Before engaging one, and annually after, the adviser or fund would have to determine in writing a reasonable basis, after due inquiry, for believing the trust company is authorized by the relevant State banking authority to provide crypto asset custody and keeps written safeguarding policies; review its latest audited financial statements and internal control report; and keep client assets segregated from the company's own.
Who it covers
The proposal applies to SEC-registered investment advisers and to regulated funds. The fund self-custody and state trust company rules would not reach face-amount certificate companies — a "very limited universe" with particular regulatory requirements, the release says — or unit investment trusts, which it says "lack investment advisers and are unmanaged."
How to comment
The SEC says comments will be due 60 days after the proposing release is published in the Federal Register. Publication has not happened, so there is no deadline yet: the release's DATES section still reads "Comments should be received on or before [INSERT DATE [60] DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]." Comments may be filed through the SEC's online form, by email to rule-comments@sec.gov, or on paper to the Commission's Secretary, citing File Number S7-2026-35.