The SEC would let advisers hold clients' crypto themselves when no custodian will, and budgets for 823 of them doing it

The Securities and Exchange Commission on 1 October proposed rules that would let registered investment advisers and regulated funds keep crypto assets with state-chartered trust companies and, where no permitted custodian will take a particular asset, hold it themselves. The proposing release, IA-7023, runs to 760 pages and carries RIN 3235-AN46, the custody rulemaking the commission's regulatory agenda had listed for October. It defines a crypto asset as "any digital representation of value that is recorded on a cryptographically secured distributed ledger", and it replaces the 2023 safeguarding proposal, which the commission formally withdrew on 12 June 2025. Comments run for 60 days from publication in the Federal Register; the release on the SEC's site still carries placeholders for that date.

The self-custody route is hedged with conditions. An adviser would have to determine in writing, before taking custody and every quarter after, that no permitted custodian is available for the asset; have safeguarding systems covering private key management, with any transaction needing the joint approval of at least two people; keep each client's coins at addresses holding nothing else; obtain an internal control report within six months and yearly after that; and send clients statements at least quarterly. For a fund, the board must review the adviser's finding before custody begins and every quarter. Hester Peirce, the commissioner who has led the agency's Crypto Task Force, said in her statement that the term "does not reflect true self-custody by investors", since it describes an adviser holding a client's assets. The trust company route asks the adviser or fund to have a reasonable basis for believing the firm is authorised by its state banking authority, to review its accounts and controls, and to see client assets kept apart from its own. The release estimates that approximately 19 state trust companies now specialise in crypto custody.

The case for the change is the one the release makes about the market: "few such traditional custodians have offered robust custodial services for a substantial range of crypto assets". Of the 2023 attempt, Peirce wrote that "compliant crypto custody looked impossible under the proposal". Paul Atkins, the chairman, said the new text gives "investment advisers and funds a compliant pathway where none existed before". The scope cuts both ways. The adviser rule would apply only "with respect to crypto assets that are funds or securities", and the release names payment stablecoins from GENIUS Act permitted issuers or registered foreign issuers, along with tokenized deposits, as digital representations of funds. A dollar stablecoin in a client account would be custodied like cash; a token that is neither money nor a security would not be covered by the rule at all. The proposal also adds questions to Form ADV and Form N-CEN on tokenized private funds and tokenized fund shares.

How often advisers would use self-custody is not settled, and the SEC's own numbers point two ways. An SEC official quoted by CoinDesk said the circumstance would likely be unusual, though it could apply to a newly launched token that custodians do not yet support. For its paperwork estimate, the release assumes that about 5 per cent of the 16,442 registered advisers, approximately 823, will self-custody client crypto. Its economic analysis puts the cost at $173,499 per adviser to start and $433,833 a year, of which $376,000 is the annual internal control report, and the crypto custody rule as a whole at $284m in initial and $407m in annual costs. Nor is the list of custodians closed: the release asks whether a firm holding only a New York BitLicense, which it says is not authorised to exercise fiduciary powers, should qualify, and as drafted it does not.

The proposal carried statements from Atkins, Peirce and Mark Uyeda, and Atkins and Uyeda issued a statement the same day on Peirce's departure without giving a date. CoinDesk reported that she leaves on 2 October, leaving the agency with two commissioners, and that it had moved to lower its quorum; the SEC pages read on 2 October state neither. CNBC, the only outlet outside the crypto trade press found carrying the proposal, added an analyst's comment and nothing further from the release. Parameter, a crypto news site, printed as Peirce's a sentence about self-custody that is not in her statement, which says "True self custody is not the right choice for everyone".