Registered investment advisers and regulated funds in the United States generally must keep client assets with a qualified or otherwise permitted custodian. Crypto assets have strained those rules. On 6 October 2026, the Securities and Exchange Commission published a proposed rule—Document 2026-20466, citation 91 FR 63870, Releases IA-7023 and IC-36353, File S7-2026-35—on adviser and regulated-fund custody, including tailored crypto custody provisions. [1]
This is a proposal, not a final rule. Comments are due on or before 7 December 2026. [1]
What problem is the Commission describing?
The release says existing custody frameworks were designed for traditional assets, while crypto markets have grown and few traditional permitted custodians offer broad crypto services. It discusses obstacles for broker-dealer and bank custody, the rise of state-chartered limited purpose trust companies, and staff statements including a 30 September 2025 no-action letter on treating certain state trust companies as banks for custody purposes—staff positions that do not themselves change the law. [1]
Adviser self-custody—only when no qualified custodian is available
The proposal would amend the Advisers Act custody rule (redesignating it as proposed rule 223-1) to allow an adviser to self-custody client crypto assets for which it provides advice without a permitted custodian, subject to conditions. Self-custody is defined around possession of any portion of the private key materials needed to access and move the asset. [1]
Core conditions summarised in the proposal overview include: [1]
- A written determination, initially and quarterly, that a permitted custodian is not available for that crypto asset.
- Documented safeguarding expertise and systems covering private-key management, joint authorisation of transactions by at least two people, and per-client address segregation on the crypto network.
- Cybersecurity controls with at least annual review.
- An internal control report within six months of starting self-custody and annually thereafter.
- At least quarterly client statements (or equivalent usable electronic information) identifying addresses, balances and transactions.
- A written financial-asset / securities-intermediary election under applicable state law.
For regulated funds, a companion fund self-custody path would require the adviser to meet those conditions and board oversight (including reviewing the “no qualified custodian” determination). Scope for advisers generally tracks funds or securities; for regulated-fund accounts, securities and similar investments—and the proposal expressly notes that native digital commodities such as bitcoin can be covered when self-custodied for a regulated fund’s account. [1]
State trust companies as permitted crypto custodians
Separately, the proposal would allow state trust companies to custody crypto for advisers and regulated funds if, among other conditions, the adviser or fund has a reasonable basis (initially and annually) that the trust company is state-authorised for crypto custody and maintains safeguarding policies; reviews audited financials and internal control reports; and keeps client crypto segregated from the trust company’s proprietary assets (with a custodial agreement requirement for regulated funds). [1]
The package also proposes broader custody modernisation, recordkeeping (including records on a crypto network if promptly producible in human-readable form), and Form ADV / Form N-CEN disclosure updates. [1]
What this does not prove
- That self-custody or state-trust-company custody is already authorised under final rules; the comment period runs to 7 December 2026. [1]
- That every crypto asset will qualify, or that advisers may self-custody when a qualified custodian is available. [1]
- That staff no-action relief equals a permanent statutory change.
- Any suitability of a particular custodian, token or fund structure.
No investment advice is offered here.
The Bottom Line
The SEC’s 6 October 2026 Federal Register proposal would create a conditional path for adviser self-custody of crypto when no qualified custodian is available, plus a clearer route for state trust company crypto custody—alongside wider custody modernisation. Until the Commission adopts a final rule, treat every element as proposed, with comments due 7 December 2026.
Sources
- Federal Register, Adviser and Regulated Fund Custody Rules; Crypto Custody Rules (proposed rule 2026-20466, 91 FR 63870) — published 6 October 2026; comments due 7 December 2026 — https://www.federalregister.gov/d/2026-20466
, published 6 Oct 2026. Would allow limited adviser self-custody when no qualified custodian is available, and state trust company custody under conditions. Comments due 7 Dec 2026. Proposed only.){kind=link}