SEC Proposes First Crypto Custody Rules for Advisers and Funds: What Changes

The SEC proposed on Oct. 1, 2026 the first custody rules built for crypto held by investment advisers and funds: state trust companies as custodians, a narrow self-custody path and wider broker-dealer custody. Comments are due Dec. 7. Our side-by-side comparison.

Oct 13, 2026 - 21:27

Updated: 8 days ago

SEC Proposes First Crypto Custody Rules for Advisers and Funds: What Changes

Comic-style illustration of an open steel vault full of gold Bitcoin and Ether coins next to a neoclassical government building, with a key, a hardware key and legal documents in the foreground

Key takeaways

On October 1, 2026, the SEC proposed the first custody rules written for crypto assets held by registered investment advisers and regulated funds (Release IA-7023 / IC-36353, file S7-2026-35; SEC press release 2026-100).
The text was published in the Federal Register on October 6, 2026 (91 FR 63870). Comments are due by December 7, 2026 (Federal Register document 2026-20466).
State-chartered trust companies would be allowed to hold crypto for advisers and funds, subject to due diligence repeated every year (SEC fact sheet).
For the first time, advisers could self-custody crypto, but only after documenting in writing that no permitted custodian is available, with two-person authorization for transactions and separate on-chain addresses per client.
Funds could use any registered broker-dealer as custodian, not only exchange members. Chairman Paul Atkins called it a "compliant pathway where none existed before" (statement).

Context: this is the second big SEC crypto rulemaking open for comment this autumn, after the Regulation Crypto Assets proposal, whose comment period closes on October 20. New to institutional crypto products? Start with our guide on how spot crypto ETFs work.

What did the SEC propose?

The proposal, titled "Adviser and Regulated Fund Custody Rules; Crypto Custody Rules", rewrites the custody rules that apply to money managers registered under the Investment Advisers Act and to funds registered under the Investment Company Act. According to the proposing release, the adviser custody rule 206(4)-2 would be amended and renumbered as rule 223-1, and two new fund rules would be created: rule 17f-8 (custody by state trust companies) and rule 17f-9 (fund self-custody through the adviser). Business development companies would also be brought under the fund custody and recordkeeping rules.

The release defines a crypto asset as a digital representation of value recorded on a cryptographically secured distributed ledger, a definition that largely tracks the "digital asset" concept in the GENIUS Act on stablecoins (see our explainer What is a stablecoin?).

Current rule vs proposal (our comparison)

We compared the SEC fact sheet and proposing release with the rules in force today. The table summarizes the main changes.

Topic	Rules in force today	October 2026 proposal
Who can hold client crypto	"Qualified custodians": banks and savings associations, registered broker-dealers, futures commission merchants, certain foreign institutions. Whether a state trust company counts as a "bank" is a fact-specific legal question.	"Permitted custodians" explicitly include state trust companies authorized by their state banking regulator to custody crypto.
Due diligence on a trust company	No crypto-specific requirement; reliance on a September 30, 2025 staff no-action letter.	Reasonable belief, after due inquiry, before engagement and every year: state authorization, written safeguarding policies, review of audited financials and internal-control report, segregation of client assets.
Adviser self-custody	No compliant pathway for crypto.	Allowed only if the adviser determines in writing that a permitted custodian is not available (before custody and at least quarterly).
Private keys	Not addressed by the rule text.	Key management controls, joint authorization by at least two people for transactions, separate on-chain addresses for each client.
Fund custody at a broker-dealer (rule 17f-1)	Limited to broker-dealers that are members of a national securities exchange.	Any registered broker-dealer, if the assets are covered by the customer protection rule.
Independent checks on self-custody	Surprise examination regime designed for traditional assets.	Internal-control report by an independent public accountant within 6 months, then annually; PCAOB registration requirement for that accountant removed.
Airdrops and forks	Unclear.	Receiving a distributed crypto asset would not breach the custody rules if conditions are met.

Sources: SEC fact sheet IA-7023, proposing release IA-7023 / IC-36353. Comparison compiled by BullishStation; it simplifies a long release, so check the original text before relying on any detail.

Why the SEC is doing this

Closing a gap left in 2025. The 2023 "Safeguarding Advisory Client Assets" proposal would, in Commissioner Hester Peirce's words, "generally result in an adviser with custody of a crypto asset security being in violation". The SEC withdrew it in June 2025 (Federal Register, June 17, 2025), months after SAB 122 rescinded the SAB 121 accounting guidance (SEC, SAB 122).
Competition among custodians. Peirce said adding state trust companies "would increase competition" (statement). This matters as crypto firms seek bank-like charters, such as Circle with its OCC national trust bank approval.
Workable rules. Commissioner Mark Uyeda argued that "rules that are unworkable in practice will not protect investors but merely provide the illusion of protection" (statement). Atkins added that custody capabilities "may lag an asset's deployment by many months", which is the case the self-custody exception targets.

What it could change for markets

Registered advisers manage a large share of US wealth but have been cautious about holding crypto directly because of custody uncertainty. A clear pathway could make it easier for advisers and funds to hold spot crypto, tokenized funds or new tokens before large custodians support them. It does not by itself create demand: flows into products such as spot Bitcoin and Ether ETFs remain driven by rates and risk appetite, as our ETF flows tracker shows, and US spot Ether ETFs have just had 10 straight sessions of outflows. For the wider picture, see our liquidity and institutional flows guide and our explainer on tokenized real-world assets.

Our calculation: why the deadline is December 7

Sixty days after Federal Register publication on October 6 falls on Saturday, December 5, 2026. The Federal Register sets the deadline at Monday, December 7. That leaves 55 days from today (October 13) to comment, and means the SEC will be reviewing several crypto files in parallel at year-end:

File	Status on October 13, 2026	Next date
Regulation Crypto Assets (S7-2026-27)	Proposed, comments open	Comments close October 20, 2026 (our coverage)
Crypto custody for advisers and funds (S7-2026-35)	Proposed, comments open	Comments close December 7, 2026 (SEC docket)
CLARITY Act (market structure law)	Pending in the Senate	No vote scheduled (what comes next)

What to watch next

October 20, 2026: end of comments on Regulation Crypto Assets. Our October 8 article will be updated with the number of comment letters.
From now to December 7, 2026: comment letters on S7-2026-35 from custodians, trust companies and asset managers, published on the SEC docket page.
December 7, 2026: end of the custody comment period (Federal Register). A final rule would need a new Commission vote.
Related: the CFTC is running its own crypto rulemakings (see our CFTC crypto rules explainer).

FAQ

Is the SEC crypto custody rule final?

No. It is a proposal. The public can comment until December 7, 2026, after which the Commission must vote again to adopt a final rule, possibly with changes.

Can a financial adviser hold Bitcoin for clients under the proposal?

Yes, through a permitted custodian such as a bank, a registered broker-dealer or a qualifying state trust company. Self-custody by the adviser would be allowed only when no permitted custodian is available, under strict conditions.

Does the proposal cover staking?

The fact sheet does not address staking. The release mentions staking only as a right some crypto assets carry; we found no staking-specific rule in the proposal.

How do I comment?

Through the SEC's comment form or by email, citing file number S7-2026-35, as explained on the docket page.

Sources

Latest: SEC's 2027 exam priorities don't mention crypto once (October 24, 2026)

Related news: Tokenized stocks go 24/7: OKX-ICE, Securitize and Coinbase compared (October 13, 2026).

This article is for information only and is not legal or investment advice. Crypto assets are volatile and you can lose all the money you invest. Information as of October 13, 2026.

Latest: OCC report: large banks restricted crypto issuers, exchanges and administrators (October 17, 2026).