SEC Proposes Conditional Crypto Self-Custody Route for Investment Advisers

Summary

• SEC proposes allowing investment advisers to hold clients’ crypto directly when eligible custodians are unavailable, subject to quarterly availability checks.
• Advisers would need private-key safeguards, joint authorization, separate client addresses, and quarterly statements identifying blockchain addresses and their corresponding networks.
• The proposed framework remains subject to public feedback, with a 60-day comment period following its publication in the Federal Register.

The U.S. Securities and Exchange Commission has proposed allowing investment advisers to hold clients’ crypto directly when eligible custodians are unavailable. According to the proposal, advisers would need technical expertise, protective controls, and quarterly checks on custodian availability.

Additionally, state-chartered trust companies would receive a pathway to provide crypto custody services for investment advisers and regulated funds. The framework would amend requirements under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. SEC Chairman Paul Atkins explained that existing rules primarily address traditional assets, while custodial services can lag newly developed crypto assets.

Private-Key Controls and Separate Addresses Would Protect Client Holdings

Before holding crypto directly, advisers would need to establish that no permitted custodian can safeguard the particular asset. Investment advisers would repeat that assessment quarterly and demonstrate the expertise necessary to protect each asset under management.

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… https://t.co/9C5LvRb8b5

— Paul Atkins (@SECPaulSAtkins) October 1, 2026

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Moreover, private-key management procedures would require joint authorization involving at least two people, adding oversight to the custody process. Each client’s crypto would occupy one or more blockchain addresses containing only assets belonging to that particular client.

Advisers would also assess custody risks and prepare a report examining the controls and safeguards supporting custodial services. Meanwhile, quarterly account statements would identify the blockchain addresses holding clients’ crypto and specify the networks supporting those addresses.

Public Comments Would Precede Any Final SEC Custody Rules

However, the framework remains a proposal, so advisers cannot treat these provisions as an adopted exemption from existing custody requirements. The public would have 60 days to submit comments following publication in the Federal Register before the SEC considers adoption.

Public feedback could influence the conditions governing self-custody, including the operational safeguards and reporting obligations attached to the proposed arrangement. Consequently, the final requirements could differ from the framework outlined in the proposal, depending on the SEC’s subsequent decisions.

The SEC’s proposal links expanded custody options with recurring eligibility checks, separate client holdings, and disclosures identifying where advisers maintain assets.

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