The US Securities and Exchange Commission proposed new custody rules for crypto assets held by registered investment advisers and regulated funds. The framework would permit conditional self-custody and allow state trust companies to serve as custodians. The Commission said the proposal was designed to provide a compliant route for activities not clearly addressed by existing rules.
The proposal is identified as File No. S7-2026-35 and includes changes under the Investment Advisers Act and the Investment Company Act. It would modernise related reporting, recordkeeping and public-disclosure requirements. Comments are due 60 days after publication in the Federal Register.
CONDITIONS SHAPE SELF-CUSTODY
Under the proposed framework, advisers and funds could use self-custody when a permitted custodian is unavailable, subject to an initial assessment and quarterly reassessment. The rules would also establish conditions for using state trust companies to hold client and fund crypto assets.
The package would redesignate the existing advisers’ custody rule and amend Forms ADV, ADV-E and N-CEN. Proposed disclosure changes would add information about tokenised private funds and regulated investment-company shares.
COMMENT PERIOD OPENS
The SEC’s approach differs from its 2023 custody proposal, which had focused on qualified custodians and prompted concern over whether crypto firms could satisfy the requirements. The new proposal seeks to define a more tailored custody framework while retaining conditions intended to protect client assets.
The rules are proposals and do not yet change advisers’ or funds’ obligations. The next milestone will be the close of the 60-day comment period, after which the Commission may revise, adopt or withdraw the framework.