SEC Proposes Crypto Custody Framework for Advisers and Funds
The SEC's October 1, 2026 proposal would widen who can hold client crypto for registered advisers and regulated funds. The practical change is in the incentives it sets for custodians, auditors and fund sponsors, and none of it takes effect until a final rule.
The U.S. Securities and Exchange Commission's October 1, 2026 proposal would let advisers and funds hold client crypto with state trust companies and, in limited cases, self-custody, widening the qualified-custodian-only path under the Investment Advisers Act of 1940. It is only a proposal: a 60-day comment period follows Federal Register publication, so current obligations stand.
The Ledger Desk · 3 min read- The SEC proposed custody amendments on October 1, 2026 under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 (SEC press release 2026-100).
- The proposal would allow state trust companies to act as custodians and would permit self-custody of crypto assets under specified conditions.
- It would also update financial statement audit requirements for registered advisers and broker-dealer custodial services for regulated funds.
- Comments are due 60 days after the proposing release appears in the Federal Register, so current custody obligations still apply.
- For compliance teams, the open question is what conditions attach to self-custody and which state trust companies will meet them.
The U.S. Securities and Exchange Commission proposed on October 1, 2026 to rewrite how registered investment advisers and regulated funds can hold client crypto assets. According to the agency's press release, the amendments would add state trust companies as custodians and allow self-custody in limited circumstances. CoinDesk reports the proposal runs to roughly 760 pages and follows the SEC's earlier digital-asset releases. The practical question for compliance teams is which custody arrangements become defensible once a final rule exists.
What the proposal would change
The proposal would replace a single custody route with a tailored framework for crypto assets. The SEC says it would modernize custody rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, permit self-custody under certain circumstances, and let state trust companies hold client and fund crypto. It would also update audit requirements for registered advisers and broker-dealer custodial services for regulated funds. The agency has not described these elements as final, and the conditions attached to each matter more than the headline.
Why self-custody is the provision to watch
Self-custody is the provision most likely to set incentives, because it changes what an adviser must prove. CoinDesk reports it would apply only where qualified custodians are unavailable, with quarterly reviews and expertise requirements. That detail comes from the press account and should be checked against the proposing release. If the conditions are strict, the exception stays narrow. If they are loose, the control burden moves from the custodian to the adviser's own key management and audit trail.
What happens next
Nothing binds advisers yet. The SEC says the public comment period lasts 60 days after the proposing release is published in the Federal Register, and a final rule would follow only after the Commission weighs those comments. Until then, existing custody obligations apply unchanged. Advisers with crypto exposure can use the window to map current arrangements against the proposed custodian categories and identify where audit and disclosure changes would fall.
What this means for compliance teams
The control gap the proposal targets is the absence of a compliant custody pathway for advisers who want crypto exposure for clients. Compliance teams should treat the draft as a planning input, not a safe harbor. Useful steps are to inventory crypto holdings and their custodians, document why a qualified custodian is or is not available, and review how state trust company oversight differs from existing custodian regimes. Comment filings will show where the industry expects friction.
- What did the SEC propose on October 1, 2026?
- It proposed new rules and amendments under the Investment Advisers Act and the Investment Company Act. They would create a tailored custody framework for crypto assets held by registered investment advisers and regulated funds, including state trust companies as custodians and limited self-custody.
- Does the proposal change adviser obligations now?
- No. It is a proposal. The SEC says a 60-day comment period runs from publication of the proposing release in the Federal Register, and nothing binds advisers until a final rule is adopted.
- Who could custody crypto under the proposal?
- Beyond today's qualified custodians, the SEC says state trust companies would be a custody option. Advisers could also self-custody client and fund crypto assets under limited circumstances and specified conditions.