SEC proposes framework letting investment advisers and funds self-custody crypto
SEC proposes new custody rules for investment advisers and funds
On October 1, the U.S. Securities and Exchange Commission proposed a framework for how investment advisers and regulated funds can hold crypto assets. The proposal aims to create a compliant path for holding digital assets under rules that largely predate the internet.
Under the framework, advisers would be permitted to self-custody client and fund crypto assets under limited circumstances, and state trust companies could serve as custodians for those assets.
Key details from the proposal
- Advisers can self-custody client and fund crypto assets when no permitted custodian is available.
- State trust companies would be permitted to act as custodians for crypto assets held by clients and regulated funds.
- The proposal addresses a gap where qualified custodial infrastructure for some crypto assets may not yet exist.
- Existing custody rules have not kept pace with crypto's growth since Bitcoin's creation in 2008.
Why this matters for institutional investors
Asset managers, hedge funds, and similar institutions often want to hold bitcoin (the largest cryptocurrency by market value) and other crypto assets directly, rather than through an ETF (a fund that tracks the price of an underlying asset) or another intermediary. The proposal would give these institutions a clearer regulatory path to do so.
What SEC Chair Paul Atkins said
In a statement released alongside the proposal, Atkins noted that crypto has grown from a niche curiosity into a multi-trillion-dollar asset class since Bitcoin's creation in 2008.
"Unfortunately, our rules and regulations have not kept pace," Atkins said. He also stated that more regulatory proposals are expected and that he looks forward to continuing to help President Trump cement the United States as the crypto capital of the world.
How Commissioner Peirce clarified the self-custody concept
SEC Commissioner Hester Peirce made clear that the proposed self-custody means advisers acting as custodians for client assets, not individual investors controlling their own crypto directly.
"True self-custody is not the right choice for everyone, but many crypto owners prize being able to custody their own assets," Peirce said. She added that regulators should protect investors' right to self-custody and not force them to hold assets with another party.
Context: the Clarity Act failure
The proposal comes after the Clarity Act failed to pass the Senate in September. Following that defeat, both the SEC and the CFTC (Commodity Futures Trading Commission) moved to accelerate their own regulatory efforts.
In the days after the Clarity Act failure, the SEC released its long-awaited innovation exemption, and the CFTC filed crypto asset rulemaking with the White House.
NovaDius President Nate Geraci wrote on X (formerly Twitter) that regulators were "moving quickly & aggressively" and said some politicians would wish they had passed the Clarity Act.
What happens next
The public comment period for the proposal will remain open for 60 days. The SEC said more regulatory proposals are expected in the coming months.
Sources
Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.
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