SEC proposes letting investment advisers self-custody client crypto assets
In brief
- SEC proposal would let advisers self-custody client crypto when no eligible custodian is available.
- State trust companies could serve as crypto custodians under the proposed rules.
- Self-custody would require quarterly reassessment, key safeguards and two-person transfer approval.
- Public comment period runs 60 days after Federal Register publication.
The custody problem
Custody has been the sticking point. Investment advisers can struggle to find a qualified custodian for a particular token, according to Cointelegraph, and that limits what they can offer clients. In a May 2025 submission to the SEC, the Digital Chamber said some advisers had declined token allocations or asked portfolio companies to keep them until custody became available.
That's the gap this proposal targets.
“The crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace,” US Securities and Exchange Commission Chair Paul Atkins said in a statement.
Commissioner Hester Peirce compared the regulatory uncertainty to a "roller coaster" in her own statement on Thursday.
What self-custody would require
The bar isn't low. Advisers seeking to self-custody client crypto would have to establish that no permitted custodian is available for each asset and reassess that determination every quarter, under the proposal as reported by Cointelegraph. If a custodian became available, the assets would need to be transferred as soon as reasonably practicable. Advisers would also need safeguards around private keys and cybersecurity, separation of each client's holdings, and approval from at least two authorized individuals for any transfer.
Commissioner Mark Uyeda said the proposal recognized that adviser custody creates an inherent conflict of interest, and that advisers' fiduciary duties would continue to apply.
Regulated funds could keep crypto in self-custody with their adviser too, provided the adviser met those requirements and the fund's board oversaw the arrangement. A state trust company acting as custodian would need authorization from the relevant state authority to provide crypto custody, reasonable safeguarding procedures, audited financial statements and internal control reports (plus client holdings kept separate from its own assets). The package also proposed changes to audit, recordkeeping and disclosure requirements.
The bigger regulatory picture
The proposal is part of an SEC and CFTC push to set clearer crypto rules under their existing powers after the CLARITY Act failed to advance in the Senate last month, Cointelegraph reported. It noted the CFTC has submitted a crypto-market proposal for White House review, while the SEC has opened a path for trading tokenized stocks.
For now, it's still a draft. The SEC will accept public comments for 60 days after the proposal is published in the Federal Register.
Frequently asked questions
What does the SEC's crypto custody proposal change for investment advisers?
The proposal would let investment advisers hold clients' crypto assets themselves, with conditions, when no eligible crypto custodian is available. It would also allow state trust companies to serve as crypto custodians, according to Cointelegraph.
What conditions would advisers face to self-custody client crypto?
Advisers would have to establish that no permitted custodian is available for each asset and reassess that every quarter. They'd need safeguards around private keys and cybersecurity, separation of each client's holdings, and approval from at least two authorized individuals for any transfer. Assets would move to a custodian as soon as reasonably practicable once one became available.
Is the SEC custody proposal a final rule?
No. It's a proposal, and the SEC will accept public comments for 60 days after it is published in the Federal Register.
