U.S. SEC Outlines Crypto Custody Rules in New Proposal Advancing Digital Assets Agenda

SEC Proposes New Crypto Asset Custody Framework

The U.S. Securities and Exchange Commission has proposed a new rule designed to clarify how investment advisers, funds, and other investment firms can hold and safeguard customer crypto assets. The proposal, announced Thursday, is intended to provide a more defined regulatory pathway for firms operating in the digital asset market.

“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,” said SEC Chairman Paul Atkins in a statement.

The SEC’s approach would clarify which types of companies are permitted to hold crypto assets and outline how investment advisers and regulated funds must maintain records and submit federal disclosures. The proposal also includes additional guidance on industry practices and auditing requirements related to crypto asset custody.

Proposal Addresses Limits of Existing Custody Rules

Atkins said the SEC’s current custody framework was created to protect client and fund assets from several forms of harm, including loss, theft, misuse, and misappropriation. However, he said the rules were not designed to address digital assets.

Atkins said that existing custody rules “were designed to protect the assets of advisory clients and regulated funds from loss, theft, misuse, and misappropriation,” but they only consider “the custody and safekeeping only of traditional assets — an untenable situation in the 21st century.”

The proposed rule would therefore apply the SEC’s investor-protection and oversight framework to crypto asset custody while clarifying compliance expectations for firms and regulated funds. It would also address how custodians document their activities and meet auditing obligations.

Self-Custody and State-Chartered Trusts

In addition to clarifying the role of qualified custodians, the proposal would allow investment advisers and regulated funds to use self-custody for crypto assets under certain circumstances. It would also permit state-chartered trusts to serve as custodians, broadening the types of institutions that could potentially provide custody services under the proposed framework.

Why This Matters

The SEC proposal is significant because it seeks to bring crypto asset custody into a clearer federal compliance structure. Existing rules focus on traditional assets, while investment firms and funds increasingly need guidance on how digital assets should be held, documented, disclosed, and audited. The proposal is now subject to a 60-day public comment period, after which the SEC can review feedback before deciding on any next steps.

Frequently Asked Questions

What would the SEC’s proposed rule change?

It would clarify how investment advisers and regulated funds can custody crypto assets, which companies can hold them, and what recordkeeping, disclosure, industry-practice, and auditing requirements would apply.

Would the proposal allow crypto self-custody?

Yes. The proposal would allow self-custody of crypto assets under certain circumstances.

Could state-chartered trusts serve as crypto custodians?

Yes. The proposed rule would permit state-chartered trusts to act as custodians.