• The SEC proposed rules and amendments under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 on October 1, 2026 for custody of crypto assets.
• The proposal would allow crypto to be held in self-custody under certain circumstances and would allow state trust companies to act as custodians for client and fund crypto assets.
• According to the SEC, it also updates requirements on adviser financial statement audits and broker-dealer custodial services for regulated funds.
• The Block reports a 60-day public comment period, and the framework only takes effect if the SEC adopts a final rule.
• For compliance teams, the open questions are how narrowly the self-custody conditions are drawn and what controls the final text demands.

The SEC proposed on October 1, 2026 to give registered investment advisers and regulated funds a defined way to custody crypto assets, according to the agency's press release. The proposal would permit crypto to be held in self-custody under certain circumstances and allow state trust companies to act as custodians. It changes nothing yet: the text is open to comment, and the conditions attached to each route will determine its practical value.

What the proposal covers

The proposal amends rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, per the SEC. It covers registered advisers and regulated funds, including registered investment companies and business development companies. Beyond crypto-specific custody, the SEC says it updates requirements on financial statement audits for advisers and on broker-dealer custodial services for regulated funds. Chairman Paul Atkins described the aim as replacing uncertainty created by custody rules written for an earlier era.

Why the self-custody and trust-company routes matter

The two routes address a structural problem: custody rules assume a qualified custodian, and for some crypto assets advisers have had few clearly eligible options. The Block reports that advisers could act as custodian where no other permitted custodian is available and in limited circumstances. Adding state trust companies widens the eligible custodian pool. Which assets, controls and conditions qualify is the detail the final text must settle.

The incentive a compliance team should price

A permitted self-custody route shifts safeguarding risk onto the adviser, which would then carry key-management, segregation and audit obligations that a third-party custodian otherwise absorbs. That is an inference from the proposal's structure, not a statement from the SEC. Commissioner Hester Peirce said true self-custody is not right for everyone, which signals that the exception is meant to be conditional rather than a default.

What to watch next

The Block reports a 60-day comment window and links the move to the Senate's failure to pass the Clarity Act, framing the SEC and CFTC as moving ahead on rules without new legislation. Watch the comment record for objections on investor protection, how the SEC defines the limited circumstances for self-custody, and whether any final rule keeps both routes intact. Until adoption, advisers should treat it as direction, not permission.