Key Highlights:
- The SEC is considering allowing state-chartered trust companies and regulated broker-dealers to provide crypto custody services under specific safeguards.
- A proposed exemption would permit authorized discretionary trading without strict custody requirements if client accounts remain protected.
- The proposal replaces the SEC’s 2023 “Safeguarding Rule” proposal and is now subject to a 60-day public commentary period.
SEC Proposes Broader Crypto Custody Framework
The SEC is considering a framework that would expand the range of institutions permitted to provide cryptocurrency custody services. Under the proposal, state-chartered trust companies could offer crypto custody, subject to specified conditions.
Allowing state-chartered trust companies to enter the market would extend crypto custody services beyond traditional banks. Banks can sometimes face limitations related to technology and regulatory flexibility when safeguarding digital assets, according to the proposal’s rationale.
The SEC is also proposing an exemption for authorized discretionary trading from strict custody requirements, provided that client accounts remain protected. The measure is intended to address trading arrangements while maintaining safeguards for customer assets.
Regulated Broker-Dealers Could Become Crypto Custodians
Another part of the proposal would recognize regulated broker-dealers as legal crypto custodians. The SEC’s latest approach removes an initial requirement that these entities be members of a national securities exchange.
Broker-dealers seeking to qualify under the framework would still have to comply with customer protection rules and maintain appropriate asset segregation. These conditions are designed to keep customer assets separated and protected while allowing regulated financial firms to participate more directly in crypto custody.
SEC Chairman Paul Atkins said the proposed framework would eliminate the “grey of uncertainty” created by outdated rules that have failed to keep pace with the evolving crypto ecosystem.
Public Comment Period and Expected Timeline
The latest proposal replaces the SEC’s 2023 “Safeguarding Rule” proposal, which the agency withdrew in 2025 after facing substantial criticism over its restrictive nature.
The new proposal has entered a 60-day public commentary period. Once that period ends, the SEC will review the submissions, prepare revisions and hold a vote before issuing final guidelines.
The SEC previously announced a related proposal known as “Regulation Crypto Assets.” Given the scale of both initiatives, votes are not expected until the first half of 2027 at the earliest.
Why This Matters
The proposal could broaden the institutional infrastructure available for crypto custody by allowing more regulated entities to safeguard digital assets. It also reflects the SEC’s effort to update custody requirements as the crypto market develops beyond traditional banking and securities-exchange structures.
However, the framework is not yet final. Public comments, agency revisions and a subsequent SEC vote will determine whether the proposed conditions and eligibility rules become binding guidelines.
Frequently Asked Questions
Which institutions could provide crypto custody services under the proposal?
State-chartered trust companies and regulated broker-dealers could provide crypto custody services if they meet the conditions set out in the SEC proposal.
What safeguards would apply to broker-dealers?
Broker-dealers would have to maintain customer protection rules and segregate customer assets. The proposal would also remove the initial requirement that they be part of a national securities exchange.
When could the SEC vote on the proposals?
The proposals are not expected to reach a vote until the first half of 2027 at the earliest. The latest crypto custody proposal is currently subject to a 60-day public commentary period.