Short answer: The SEC has proposed, but not adopted, new custody rules for registered investment advisers and regulated funds. Issued October 1, 2026, the proposal would create a tailored framework for certain crypto assets, conditionally allow advisers and funds to self-custody, allow state trust companies to serve as custodians under specified conditions, and update related recordkeeping, reporting and disclosure requirements.
It does not seize or invalidate consumer wallets, and it does not regulate every cryptocurrency. The proposal mainly addresses how regulated firms hold crypto assets that fall within federal securities-law custody rules.
What the SEC actually proposed
The SEC’s action is a proposed rule, not a final rule. The agency issued it on October 1, 2026, under file number S7-2026-35, release numbers IA-7023 and IC-36353, and RIN 3235-AN46. The proposal must go through notice-and-comment rulemaking before any new requirements become effective.
The covered entities are:
- Registered investment advisers.
- Registered investment companies.
- Business development companies.
The proposal would modernize existing custody requirements while creating specific pathways for crypto custody. Those pathways include conditional self-custody by an adviser or fund and use of state trust companies that meet the eventual rule’s conditions.
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What “in jeopardy” means—and what it does not mean
The headline does not mean the SEC has taken control of personal wallets, made consumer self-custody illegal, or ordered retail holders to move Bitcoin or other tokens. The proposal concerns advisers and regulated funds holding covered crypto assets under federal securities laws.
The practical jeopardy is compliance uncertainty. Firms may have difficulty finding a custodian that supports the particular assets they advise on, maintains appropriate controls, and can satisfy custody, audit, reporting and disclosure obligations. Commissioner Hester M. Peirce has noted that relatively few traditional custodians offer robust custody for a substantial range of crypto assets.
The proposed custody choices
Conditional adviser or fund self-custody
The proposal would conditionally permit an adviser or regulated fund to custody qualifying crypto assets itself. “Conditionally” is essential: the proposal does not create an automatic right to hold keys, and the final conditions could change after public comment.
A firm considering this route would need to evaluate who controls private keys and transaction authority, how access is limited and logged, how assets are segregated, and how the organization would recover from compromise, personnel loss, operational failure or an attack. A hardware wallet may be one component of an internal control system, but possession of a device alone would not satisfy an adviser’s custody obligations.
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State trust companies and other qualified-custodian arrangements
The SEC proposes to let state trust companies act as custodians under specified conditions. This would expand the potential pool beyond traditional banks and other established custodians, subject to the requirements ultimately adopted.
Using a custodian shifts key-management and operational responsibilities to a counterparty, but it does not remove the adviser’s oversight obligations. The firm would still need to confirm that the custodian supports the relevant assets, protects client property, provides usable records and reporting, and has credible plans for insolvency, outages and security incidents.
How the approaches compare
| Consideration | Conditional self-custody | State trust company or other qualified custodian |
|---|---|---|
| Control | The adviser or fund controls private keys and transaction authority, subject to the final rule’s conditions. | The custodian controls or safeguards the keys under a custody agreement and applicable law. |
| Regulatory pathway | Would be available only if the final rule’s self-custody conditions are met. | Would depend on the provider meeting the final rule’s requirements and qualifying for the arrangement. |
| Operational resilience | The firm must build recovery, access-control, incident-response and continuity capabilities. | The firm evaluates the custodian’s controls, recovery plans, audit information and service continuity. |
| Asset coverage | Potentially broad, but only where the firm can safely and lawfully support each covered asset. | Limited to the crypto assets the provider is equipped and authorized to custody. |
| Reporting and disclosure | The firm must produce the records, reports and disclosures required by the final rules. | The firm must obtain sufficient information from the custodian to meet those obligations. |
| Counterparty and legal risk | Less dependence on an outside custodian, but more internal-control and key-loss risk. | More dependence on a counterparty, with legal, segregation and insolvency questions to assess. |
Does the proposal cover Bitcoin and every other cryptocurrency?
No. The proposed Advisers Act amendments apply to crypto assets that are funds or securities. The proposed Investment Company Act custody provisions apply to crypto assets that are securities or similar investments.
That boundary matters because “crypto asset” is broader than “security.” A token is not automatically covered merely because it uses a blockchain or trades on a digital-asset platform. The asset’s legal classification and the entity holding it determine whether the proposed custody provisions apply.
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What is a qualified custodian for crypto?
In this proposal, a qualified-custodian arrangement is a regulated custody pathway for covered assets rather than a blanket label for every exchange, wallet provider or technology vendor. The SEC’s proposal would allow state trust companies to serve in that role under conditions, alongside other custodial structures that satisfy the applicable requirements.
For an adviser or fund, the relevant questions are whether the provider can legally custody the specific covered assets, keep client property appropriately segregated, supply reliable books and records, support required examinations and reporting, and address insolvency and transaction-authority risks. The proposal is not final, so the exact eligibility and safeguards remain subject to rulemaking.
Why the SEC says the rules need updating
SEC Chairman Paul S. Atkins said existing custody rules were designed for traditional assets and that crypto custody capabilities can lag an asset’s deployment by many months. In his view, advisers and funds have been left to guess how to create a lawful custody arrangement for a rapidly changing asset class.
“To that end, today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment 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.”
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Paul S. Atkins, SEC Chairman, October 1, 2026
The SEC’s stated objective is to remove regulatory barriers that inhibit crypto-related investment advice and to expand the investment choices available to regulated funds. The agency describes crypto as a multi-trillion-dollar asset class, but the SEC materials cited here do not provide a precise dollar total.
Recordkeeping, reporting and disclosure would also change
The custody proposal is not limited to where keys are held. Related amendments would update recordkeeping, reporting and disclosure requirements for advisers and regulated funds.
- Recordkeeping: Firms would need records that show what covered assets are held, where they are held, and who has authority to move them.
- Reporting: Advisers and funds would need information that supports regulatory filings, examinations and internal reconciliation.
- Disclosure: Clients and investors would need clear information about custody arrangements, controls, risks and the use of self-custody or an outside custodian.
The precise forms, schedules and control standards depend on the final rule. Firms should not treat the proposal as an immediately effective checklist.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.When is the SEC crypto-custody comment deadline?
Comments are due 60 days after the proposing release is published in the Federal Register. The SEC pages identified for this proposal do not state a fixed calendar date, so a reliable deadline cannot be given until that publication is confirmed. The docket is S7-2026-35.
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After the comment period, the SEC may revise the text, adopt a final rule, withdraw the proposal or take another action. The October 1 announcement by itself does not change an adviser’s or fund’s legal obligations.
What advisers and funds should evaluate now
- Classify each asset. Determine whether the crypto asset is a fund or security, or a security or similar investment for the applicable statutory regime.
- Map control. Document who holds private keys, who can authorize transactions, how dual control works, and how emergency access is handled.
- Test coverage. Confirm that any proposed custodian actually supports the assets, networks, transaction types and jurisdictions the firm uses.
- Review resilience. Assess key recovery, backups, incident response, business continuity, employee access and reconciliation.
- Analyze counterparty risk. Examine segregation, governing law, insolvency treatment, insurance language and the custodian’s financial and operational condition.
- Prepare records and disclosures. Make sure the firm can evidence holdings, transfers, authority, valuation inputs and client communications under whichever framework is ultimately adopted.
- Track the rulemaking. Monitor Federal Register publication, the comment deadline and any changes between the proposal and a final rule.
What retail crypto holders need to know
Retail self-custody is not directly regulated by the proposal as described in the SEC materials. A person holding coins in a personal wallet is not being ordered by this action to use a state trust company or another institutional custodian.
The proposal matters to retail investors indirectly when they invest through an adviser, registered investment company or business development company. Those firms may change which assets they can hold, which custody providers they use, and what risks they disclose if a final rule is adopted.
Anyone choosing personal self-custody should still treat key protection, recovery planning and transaction verification as security responsibilities. A consumer wallet device is not, by itself, proof that an adviser or fund meets federal custody requirements.
Is the SEC crypto-custody rule final?
No. It is a proposed rule issued October 1, 2026. The SEC must complete notice-and-comment rulemaking and adopt a final text before the new framework becomes effective. Until then, descriptions of self-custody permission, state-trust-company eligibility and other proposed changes are conditional rather than settled law.
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