SEC Proposes Letting Advisers and Funds Hold Client Crypto When No Custodian Can

The Securities and Exchange Commission proposed rules on Thursday that would let registered investment advisers and regulated funds hold client crypto themselves when no approved custodian can, and would allow state trust companies to safeguard those assets.

SEC Chairman Paul Atkins said in a statement that the plan is meant “to close a gap that has left investment advisers and funds guessing how to effect lawful custody of an asset class that their clients increasingly demand.”

Current rules generally require advisers to keep client assets with a qualified custodian, such as a bank or a registered broker-dealer. Atkins said that “with newly developed crypto assets, custodial capabilities may lag an asset’s deployment by many months.”

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An adviser could hold a client’s crypto only after concluding that no permitted custodian is available, and it would have to recheck that every quarter, according to the SEC’s fact sheet. It would also need documented expertise for each asset, private key controls requiring at least two people to approve any transaction, separate addresses for each client and outside accountant reports on its controls. Clients would get account statements at least quarterly.

“The proposal uses the term in a way that does not reflect true self-custody by investors,” Commissioner Hester Peirce wrote in a statement, noting that it covers advisers acting as custodians for clients.

Before hiring a state trust company, and each year after, an adviser or fund would need grounds to believe the firm holds state authorization to custody crypto and has written safeguarding policies, and client assets would have to be kept apart from the company’s own. “Allowing eligible state trust companies to serve as permitted crypto custodians would increase competition and expand investor protection and investment options,” Peirce wrote.

The 760-page release will be open for public comment for 60 days after it is published in the Federal Register.

Commissioner Mark Uyeda said in a statement that an earlier custody proposal, from 2023, had built a “no-win” scenario for crypto. The agency withdrew that plan in June 2025. “Rules that are unworkable in practice will not protect investors but merely provide the illusion of protection,” Uyeda said.

The proposal comes two weeks after the SEC granted an exemption for onchain trading of tokenized stocks, and after Atkins and CFTC Chairman Michael Selig pledged to write crypto rules under existing authority once the Clarity Act stalled in the Senate.

Peirce, who led the SEC’s Crypto Task Force, has set Friday as her last day at the agency. “More regulatory proposals are on the horizon,” Atkins said.

Related Listen: Crypto’s Clarity Act Collapses. Two Days Later, the SEC Introduces Its Innovation Exemption

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