SEC Proposes Crypto Custody Rules for Advisers and Funds, Opening Door to Self-Custody and State Trust Companies

The Securities and Exchange Commission on October 1 proposed a set of rules and amendments that would, for the first time, lay out how registered investment advisers and regulated funds can hold their clients' crypto assets under the federal securities laws. The proposal — issued under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 — would let crypto be held in self-custody "under certain circumstances" and would permit state-chartered trust companies to act as custodians, two options the existing custody regime does not clearly allow.

The agency framed the move as filling a gap rather than loosening a standard. "Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace," SEC Chairman Paul S. Atkins said in a statement accompanying the proposal. He said the rules would give advisers and funds "a compliant pathway where none existed before — and replacing the grey of uncertainty created by custody rules crafted for a bygone era." Atkins added, per CoinDesk, that the existing rules were "designed to protect the assets of advisory clients and regulated funds from loss, theft, misuse, and misappropriation" but contemplate "the custody and safekeeping only of traditional assets — an untenable situation in the 21st century."

What the proposal would do

The core of the package is a tailored custody framework for two groups: registered investment advisers, and regulated funds — meaning registered investment companies (RICs) and business development companies (BDCs). According to the SEC's release, the proposal would:

• Permit crypto assets to be held in self-custody under certain circumstances — a notable departure from the long-standing expectation that client assets sit with a "qualified custodian."
• Allow the use of state trust companies as custodians for both client and regulated-fund crypto assets, widening the pool of eligible custodians beyond banks and broker-dealers.
• Update requirements around financial statement audits for registered advisers and broker-dealer custodial services for regulated funds.
• Modernize recordkeeping and federal disclosure obligations, which CoinDesk notes are among the "new clarifications of industry practices and auditing requirements."

The SEC's stated aim is to "modernize custody rules and expand investor choice by removing regulatory barriers that inhibit the adviser's ability to provide crypto-related investment advice," and to let regulated funds offer "a wider range of crypto asset-related investment strategies."

This is a proposal, not a final rule. The public comment period runs 60 days from the date the proposing release is published in the Federal Register — so the specifics, including what "certain circumstances" means for self-custody, remain open to change. The SEC says the mechanics are set out in an accompanying Fact Sheet and the full proposing release; those documents govern the detail, and the high-level announcement does not spell out the safeguards attached to self-custody.

The timing

The proposal landed the day before Commissioner Hester Peirce — who has led the SEC's Crypto Task Force since it was created — leaves the agency. CoinDesk reports she departs Friday to become a professor in Virginia, and that her exit leaves the Commission with just two sitting commissioners, well short of its full complement of five. CoinDesk characterized the custody proposal as a "swan song" for Peirce's task force and said that with it, the SEC "has now put a checkmark in every major topic on the crypto agenda originally set out by Atkins."

Key facts

• What: Proposed rules and amendments on crypto custody for registered investment advisers and regulated funds (RICs and BDCs), under the Investment Advisers Act of 1940 and Investment Company Act of 1940. (SEC press release, Oct. 1, 2026)
• New options: Self-custody of crypto "under certain circumstances"; state trust companies permitted as custodians. (SEC; corroborated by CoinDesk)
• Also covered: Updated financial-statement audit requirements for advisers and broker-dealer custodial services for funds; recordkeeping and disclosure clarifications. (SEC; CoinDesk)
• Comment period: 60 days after publication in the Federal Register. (SEC; CoinDesk)
• Personnel: Commissioner Hester Peirce, head of the Crypto Task Force since inception, leaves Friday (Oct. 2), reducing the Commission to two sitting members. (CoinDesk)

The real-world read

A few things worth holding up to the light.

The agency is grading its own homework. "Replacing the grey of uncertainty" is Atkins' framing, and CoinDesk's "checkmark in every major topic" is the agency's own scorecard restated. Much of that "uncertainty," it's worth remembering, was created and sustained by the SEC itself; an agency clearing a to-do list it wrote is not the same as a problem independently solved. Read the quotes as advocacy for the rulemaking, not as neutral description of it.

Self-custody is the headline, and it's the least detailed part. Loosening the long-standing "qualified custodian" expectation to allow advisers to self-custody client crypto is a meaningful shift — those custody rules exist precisely to guard against the loss, theft, and misappropriation Atkins cites. The announcement repeats "under certain circumstances" without saying what those circumstances are; the safeguards live in the proposing release, not in the press release or the early coverage. Until the conditions are on the table, the protection-versus-access tradeoff can't be judged. The same goes for state trust companies as custodians — a wider custodian pool can also mean a shallower regulatory floor than banks or broker-dealers face.

A depleted Commission is advancing a major rule. By CoinDesk's account the SEC is down to two commissioners as this proposal moves, with the one departing being the agency's most prominent crypto voice. A thin Commission pushing through a signature deregulatory item invites questions about how much deliberation and dissent the final rule will see over the 60-day window.

Mind the sponsored content around the reporting. CoinDesk's page carries a promoted "Definitive Stablecoin Landscape Series: Asia Pacific" built around Ripple's RLUSD stablecoin — marketing material, not journalism, and unrelated to the custody proposal. It is flagged here only so it isn't mistaken for part of the news.

What's conspicuously unsaid across both the SEC's announcement and the coverage: the concrete conditions for self-custody, the capital or insurance standards state trust companies would have to meet, and how the audit requirements would actually bite. Those are the parts that determine whether this protects investors or just expands the menu.

Opinion, and whose

• The SEC (Chairman Paul Atkins): existing custody rules are "untenable" for a multi-trillion-dollar asset class and the proposal gives advisers and funds "a compliant pathway where none existed before." This is the agency's case for its own rule.
• CoinDesk: characterizes the proposal as a "swan song" for Peirce's Crypto Task Force and as the final "checkmark" on Atkins' crypto agenda — the outlet's framing of the politics and sequencing, not a finding in the proposal itself.

No forecast of market impact appears in either source, and none is offered here.

Sources

• SEC — Press Release, "SEC Proposal Would Address How Investment Advisers and Funds Can Custody Crypto Assets Under the Federal Securities Laws," Oct. 1, 2026 (primary): the proposal's scope, the statutory basis, the self-custody and state-trust-company provisions, audit and custodial-service updates, the 60-day comment period, and Chairman Atkins' statement. References an accompanying Fact Sheet and proposing release not reproduced here.
• CoinDesk, "U.S. SEC maps out crypto custody in new proposal that furthers its digital assets agenda," Oct. 1, 2026 (secondary): corroborates the proposal's terms and the comment period; adds Commissioner Hester Peirce's Friday departure, the reduced two-member Commission, and framing of the proposal within Atkins' broader agenda. The same page carries a sponsored "Stablecoin Landscape" report tied to Ripple's RLUSD — marketing, not reporting, and not used as a source for any fact above.

This is news reporting, not financial or legal advice.