The U.S. Securities and Exchange Commission has proposed rule changes that could make it easier for investment advisers and regulated funds to provide clients with exposure to crypto assets. The initiative, published on Thursday, addresses a custody problem that has slowed adoption by firms that want to allocate specific tokens but cannot always find a suitable qualified custodian.

According to the SEC, the proposal would allow advisers to hold clients’ crypto assets themselves in cases where no eligible custodian is available, subject to strict conditions. It also would open the door for certain state trust companies to act as crypto custodians, adding another potential pathway for compliance.

Key takeaways

The SEC proposal targets a practical bottleneck: advisers may be unable to offer custody for particular crypto assets due to limited availability of eligible custodians.
Advisers could self-custody client crypto only after demonstrating that no permitted custodian exists for each asset, with determinations reviewed quarterly.
Self-custody would require robust key-management and cybersecurity safeguards, along with approval controls for transfers.
The proposal would also allow state trust companies—if authorized and meeting security and segregation requirements—to provide crypto custody.
Public comments would be accepted for 60 days after the rule is published in the Federal Register.

A custody gap that limits token-by-token offerings

The SEC’s proposal is built around the reality that “qualified” custody options are not uniform across crypto assets. As the regulator noted, the crypto asset market has expanded into a large, mainstream category for investors seeking exposure, but the existing rules have not kept pace with how investment advisers actually source and safeguard digital assets.

In a statement, SEC Chair Paul Atkins said the rules have lagged behind market growth and that the SEC is trying to remove an operational barrier. The proposal is designed to reduce instances where advisers must decline token allocations—or ask portfolio companies to hold assets temporarily—because custody for a specific token cannot be arranged through an eligible custodian.

The concern is not new. The Digital Chamber previously raised similar issues with the SEC in a May 2025 filing, saying some advisers had declined allocations or asked portfolio companies to retain tokens until custody became available.

What self-custody would require

Under the proposed framework, an investment adviser seeking to custody client crypto directly would need to establish that no permitted custodian is available for each crypto asset in question. The adviser would also have to reassess that conclusion on a quarterly basis. If an eligible custodian later becomes available for a token, the adviser would need to transfer holdings as soon as reasonably practicable.

Self-custody would not be a blanket permission. The SEC’s plan includes operational and governance requirements aimed at reducing custody risk:

Safeguarding private keys and cybersecurity: advisers would have to implement controls to reduce the risk of loss or compromise.
Separation of clients’ holdings: each client’s crypto must be handled in a way that prevents mixing with other clients or with the adviser’s own assets.
Transfer approvals: at least two authorized individuals would be required to approve transfers of self-custodied crypto.

SEC Commissioner Hester Peirce characterized the uncertainty facing advisers as an ongoing regulatory “roller coaster,” arguing that firms have been effectively forced to “grit their teeth” while waiting for workable custody rules. Commissioner Mark Uyeda, in turn, said the proposal acknowledges an “inherent conflict of interest” in adviser custody, while emphasizing that advisers’ fiduciary responsibilities would still apply when they hold clients’ crypto.

The SEC also proposes that regulated funds could maintain crypto assets in self-custody with their investment adviser, provided the adviser meets the self-custody requirements and the fund’s board oversees the arrangement.

State trust companies as a custody alternative

Beyond adviser self-custody, the SEC’s proposal would permit state trust companies to serve as crypto custodians, but only if they meet specific requirements. The idea is to broaden the range of regulated entities that can qualify to hold digital assets for others.

In the SEC’s description, a qualifying state trust company would need to be authorized by the relevant state authority to provide crypto custody and must maintain “reasonable procedures” to safeguard crypto assets from loss, theft, or misappropriation. The proposal would also require audited financial statements and internal control reporting, as well as clear segregation of client holdings from the company’s own assets.

The package further includes proposed updates to audit, recordkeeping, and disclosure obligations tied to the custody arrangement.

How this fits into the SEC and CFTC’s broader crypto rulemaking push

This custody initiative comes amid broader efforts by U.S. regulators to bring more clarity to crypto activities using existing authorities. The SEC and the Commodity Futures Trading Commission have both been moving toward clearer rules for digital assets after the CLARITY Act failed to advance in the Senate last month.

Related developments include a CFTC submission of a crypto-market regulation plan for White House review, and separate SEC action that has opened a path for trading tokenized stocks under an SEC framework.

In addition, the SEC’s proposal would initiate a formal comment period. The agency stated it will accept public comments for 60 days after the rule is published in the Federal Register.

What investors and compliance teams should watch next

For advisers and funds, the key question will be how regulators and industry participants interpret “no permitted custodian available” in practice for each token, and how the proposed safeguards and transfer controls would be implemented operationally. The final impact on market access will hinge on the rule’s details as comments come in—and on whether qualifying custody capacity expands fast enough to reduce the need for self-custody over time.