SEC Proposes Revised Crypto Custody Rules for Investment Advisers
The SEC proposed revised custody rules for crypto assets on Oct 1, 2026.
Why it matters: Investment advisers and their legal teams must grasp these new rules to update compliance programs and manage custody risks under federal law. The proposal clarifies custody requirements for digital assets that diverge from traditional securities.
- Proposal updates custody rules under the Investment Advisers Act and Investment Company Act of 1940 for crypto assets.
- Allows self-custody of crypto by investment advisers and funds if they meet specific conditions, including internal controls.
- Permits state-chartered trust companies to serve as crypto custodians, subject to additional standards.
- SEC open to public comments for 60 days after the proposal appears in the Federal Register.
On October 1, 2026, the U.S. Securities and Exchange Commission issued proposed amendments to custody rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 to address custody of crypto assets by registered investment advisers and regulated funds. The existing standards were not designed with digital assets in mind, prompting the SEC to update the regulatory framework.
Chairman Gary Gensler noted that the proposal "sets forth specific conditions under which investment advisers and funds can self-custody digital assets, including enhanced internal controls and reporting requirements." The SEC also allows state-chartered trust companies to act as custodians for crypto, subject to prudential standards and additional SEC conditions.
Key criteria for self-custody include maintaining written policies on segregation of customer assets, conducting annual surprise examinations, and detailed recordkeeping. State trust companies wishing to serve as custodians would need to satisfy capital, cybersecurity, and control standards outlined in the proposal. However, some details are pending further rulemaking.
The proposal is subject to a 60-day public comment period after it is published in the Federal Register, which is expected within the coming weeks. Legal counsel to investment firms should monitor this timeline and assess the impact on existing custody arrangements and compliance controls.
Independent legal analysis from law firm insights suggest the proposal "marks an important development by providing clearer custody compliance pathways specific to crypto, but some ambiguity remains around operational requirements." Industry participants are encouraged to engage with the SEC during the comment period to shape final rules.
By the numbers:
- 60 days — public comment period after Federal Register publication
- October 1, 2026 — date of SEC proposal release
Yes, but: While the proposal clarifies some custody obligations, certain operational details and standards for self-custody and state trust companies remain subject to further clarification or rulemaking.
What's next: The SEC expects to publish the proposal in the Federal Register soon, triggering the official 60-day comment period; stakeholders should prepare formal responses.