SEC Proposes Crypto Custody Rules for Advisers and Funds, Opening a Self-Custody Path

Published October 12, 2026, 07:15 PKT. Based on the SEC press release 2026-100 and proposing release Nos. IA-7023 and IC-36353, File No. S7-2026-35 (October 1, 2026), October 2 reporting by Bitcoin Insider and Daily Crypto Briefs, October 2 analysis by Croke Fairchild, October 5 analysis by Paul Hastings, October 7 reporting by Mondaq, and October 11 reporting by TokenPost.

The U.S. Securities and Exchange Commission has proposed a new framework that would let registered investment advisers and regulated funds hold client crypto assets themselves under strict conditions, the first time the agency has offered a defined route for crypto custody. The proposal, issued October 1, 2026 as Release Nos. IA-7023 and IC-36353 under File No. S7-2026-35, runs to roughly 760 pages and amends the Investment Advisers Act of 1940 and the Investment Company Act of 1940, according to the SEC's press release and Bitcoin Insider's reporting.

SEC Chairman Paul S. Atkins said the proposal "would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before," Bitcoin Insider reported. Paul Hastings' crypto policy tracker noted Atkins called the framework another element of a comprehensive crypto asset regulatory approach.

Self-custody only when no custodian exists

The central change is conditional self-custody. Proposed Rule 223-1(b)(7) would let a registered investment adviser hold a client's crypto assets itself, without a qualified custodian, and proposed Rule 17f-9 would extend the route to regulated funds through their adviser with board oversight, Mondaq reported. But it is a fallback, not a default. Before taking self-custody, and at least quarterly afterward, the adviser must determine in writing, after due inquiry, that no qualified custodian will maintain the particular asset, and must move the assets to a custodian as soon as reasonably practicable once one becomes available, Mondaq and Croke Fairchild reported. Croke Fairchild noted that cost is not a permissible basis for the determination and that the adviser alone must possess the private keys.

Advisers that do self-custody face a long condition list. Each transaction would require joint authorization by at least two persons, client assets would be held in separate blockchain addresses, and the adviser would need documented safeguarding expertise covering private key management and cybersecurity, TokenPost reported. The controls also include annual cybersecurity reviews, quarterly client statements and an independent public accountant's internal-control report within six months of first taking self-custody, TokenPost and Mondaq reported. For registered funds, the board must review the no-custodian determination at the outset and quarterly afterward.

State trust companies become qualified custodians

The proposal also creates an express path for state-chartered trust companies to serve as crypto custodians, replacing a fact-specific legal analysis of whether they count as banks under current rules, Mondaq reported. An adviser or fund using a state trust company would first verify it is authorized by its state banking authority to hold crypto, then review its audited financial statements and internal control reports, require client and fund assets to be segregated, and confirm how the company handles staking, forks, airdrops and network migrations, TokenPost reported. The SEC would add crypto custody disclosures to Form ADV and Form N-CEN, per the agency's summary.

Bitcoin, Ether and Solana mostly sit outside the adviser rule

One nuance has surprised some commentators. The proposed Advisers Act amendments apply only to crypto assets that are funds or securities, and the release states that native digital commodities, it names Bitcoin, Ether and Solana, are generally not subject to the Advisers Act custody rule for advisory clients that are not regulated funds, according to analysis of the proposing release. They come into scope only for registered fund and business development company accounts, where a broader standard applies. So an adviser holding spot Bitcoin in a separate account or private fund faces the same position after this rule as before it, the analysis noted.

A three-year road from the 2023 proposal

The package ends a long and uneven rulemaking history. The SEC's 2023 "Safeguarding Advisory Client Assets" proposal, which extended the custody rule to all assets, was officially withdrawn in June 2025, cryptocompass reported. On September 30, 2025, SEC staff said they would not recommend sanctions against advisers treating certain state trust companies like banks, but that no-action position had no legal force, cryptocompass noted. On September 14, 2026, Atkins told the Solana Policy Institute he had asked staff for a proposal allowing crypto self-custody and state trust companies because that path "already works in practice," according to the same report. The October 1 press release describes the remaining gap: a path that works in practice is not the same as a rule, and the proposal now goes through notice and comment.

The release also moves the old custody rule's legal footing. Rule 206(4)-2, which opens by declaring it a fraudulent act to take custody without meeting its conditions, would be amended and redesignated as Rule 223-1, resting on Congress's Dodd-Frank authority rather than the antifraud provisions, according to analysis of the release.

What happens next

None of this is final. The proposal is open for a 60-day public comment period after publication in the Federal Register, which occurred on October 6, putting the deadline near December 7, 2026, according to the analysis. After comments close, the Commission may revise, adopt or decline the rules.

The custody proposal is the latest agency-led crypto rulemaking after Congress failed to advance the Digital Asset Market Clarity Act in the Senate, following the SEC's August Regulation Crypto offering proposal and its September 17 Innovation Exemption for tokenized-stock trading venues. When the SEC issued the custody proposal on October 1, Bitcoin closed the day near $84,880, up about 1.5 percent, Daily Crypto Briefs reported, providing market context rather than a reaction.

This article is news reporting and is not investment advice.

Sources

• U.S. Securities and Exchange Commission, "SEC Proposes Crypto Custody Rules for Investment Advisers and Regulated Funds," press release 2026-100 and proposing Release Nos. IA-7023 and IC-36353, File No. S7-2026-35 (October 1, 2026), primary source for the proposal, the self-custody and state trust company routes, the rule redesignations, Chairman Atkins' statement, and the comment period
• Paul Hastings, "Crypto Policy Tracker" (October 5, 2026), secondary source for the 760-page length, the regulated-fund scope, and the Form ADV and Form N-CEN amendments
• Bitcoin Insider (October 2, 2026), secondary source for the Atkins quote, the Project Crypto context, and the proposing release numbers
• Croke Fairchild (October 2, 2026), secondary source for the cost exclusion, the keys-held-alone requirement, and the fund board oversight mechanics
• Mondaq (October 7, 2026), secondary source for the text of proposed Rules 223-1(b)(7) and 17f-9 and the broker-dealer and state trust company conditions
• TokenPost (October 11, 2026), secondary source for the two-person authorization, separate addresses, quarterly statements and the internal-control report timing
• LinkedIn analysis of Release Nos. IA-7023 and IC-36353 (October 8, 2026), secondary source for the Federal Register publication date, the December 7 comment deadline, the Bitcoin/Ether/Solana scope nuance, and the Rule 206(4)-2 redesignation
• Cryptocompass (October 2, 2026), secondary source for the withdrawn 2023 proposal, the 2025 no-action letter, and Atkins' September 14 speech
• Daily Crypto Briefs (October 2, 2026), secondary source for Bitcoin's October 1 closing price