The U.S. Securities and Exchange Commission on October 2, 2026, proposed new rules that would let registered investment advisors and regulated funds act as custodians for client crypto assets, including through so-called self-custody arrangements and through state-chartered trust companies.

The proposed rules and rule amendments seek to widen the universe of authorized crypto custodians beyond the current "qualified custodian" framework, a regime SEC officials said was designed for traditional securities and does not fit how digital assets are stored and transferred.

What would the proposal change?

Under the proposal, advisors and funds would gain three notable options:

• Self-custody of client crypto assets, meaning the advisory firm itself would hold the private keys on behalf of clients.
• Use of state trust companies as custodians, a category of institution that has historically been barred or sidelined from qualified-custodian status for digital assets.
• A broader menu of custody structures for regulated funds pursuing crypto-related strategies, including exchange-traded products.

SEC Commissioner Hester Peirce framed the move as a recognition that the existing rules are not built for the asset class. "The proposal would expand authorized custody options beyond current 'qualified custodians,' who may not be available or may not have the technological expertise to safeguard certain crypto assets of advisory clients and regulated funds," she said in a statement accompanying the filing.

SEC Chairman Paul Atkins cast the package as an effort to replace regulatory ambiguity with explicit standards. "[T]oday's proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisors and funds a compliant pathway where none existed before — and replacing the grey of uncertainty created by custody rules crafted for a bygone era," Atkins said.

Why does custody matter for crypto funds?

Custody rules dictate who may hold client assets and under what capital, audit and segregation standards. For crypto, custody has been a persistent bottleneck: most spot bitcoin and ether exchange-traded products in the U.S. rely on a narrow set of qualified custodians, and several high-profile failures — including the 2022 collapse of the Bahamas-based exchange FTX — have intensified scrutiny of how digital assets are held.

The SEC's filing says the proposal is intended to "modernize custody rules, expand investor choice, and to allow regulated funds to offer a wider range of crypto asset-related investment strategies." In practice, the change would lower the operational barriers for advisors and fund sponsors that have wanted to launch or expand digital-asset products but could not secure a compliant custody arrangement.

What happens next?

The proposed rules will be open for a 60-day public comment period once they appear in the Federal Register. After the comment window closes, the SEC must review submissions and decide whether to adopt, modify or withdraw the package, a process that historically has taken anywhere from several months to more than a year for contested rulemakings.

The timing matters: the proposal lands as U.S. issuers are preparing a new wave of crypto investment products and as Canadian regulators, including the Canadian Securities Administrators, weigh their own custody guidance. A final rule with a workable self-custody option would reshape the competitive landscape between registered advisors, qualified custodians and state trust companies courting crypto mandates.