The U.S. Securities and Exchange Commission on October 1 proposed new rules governing how registered investment advisers and regulated funds custody client crypto assets, releasing the framework as the legislative alternative stalled in Congress.

SEC Chairman Paul S. Atkins announced the proposal in a statement, framing the rulemaking as a response to investor demand that the agency's framework had failed to match. "Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure," Atkins said. "Unfortunately, our rules and regulations have not kept pace."

What does the proposal actually do?

The rule would, for the first time, give investment advisers and investment companies a defined path for holding client crypto assets. Under the draft, advisers could custody assets themselves only if no qualified custodian is available. The Commission also proposed allowing state-chartered trust companies to serve as custodians, subject to conditions the agency has yet to spell out in full.

Records kept on a blockchain could satisfy parts of the adviser's recordkeeping obligations, the SEC said in press release 2026-100, provided those records meet specified standards. The proposal marks the first time the agency has explicitly contemplated on-chain data as a compliance tool for federally regulated entities.

Why is the SEC moving now?

The proposal arrives one month after the Senate blocked the Clarity Act, a comprehensive bill that would have assigned securities, commodities, and stablecoin classifications across federal agencies. The procedural defeat left the legislative path for digital asset oversight largely closed for the remainder of the congressional session.

SEC officials had telegraphed before the vote that the agency would proceed with rulemaking regardless of the bill's fate. The custody proposal is the first major deliverable from that commitment and signals a regulatory track running in parallel to Capitol Hill.

How does the framework handle self-custody?

The "no qualified custodian available" carveout is the most operationally significant element of the draft. It permits an adviser to hold client assets directly only after documenting the absence of a permissible custodian — a condition that will likely shape how advisers negotiate with banks, trust companies, and specialized digital asset custodians.

State trust companies form a second permitted category. Several states, including New York and South Dakota, have built digital asset trust charters over the past five years, and the SEC's proposal would formally integrate those institutions into the federal compliance perimeter.

What is Atkins trying to achieve?

Atkins described the proposal as a replacement for legacy custody rules drafted before crypto assets existed at scale. "Today's 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 — and replacing the grey of uncertainty created by custody rules crafted for a bygone era," he said.

The chairman has framed his tenure around making the U.S. what he calls the "crypto capital of the world," a posture the custody proposal appears designed to reinforce through rulemaking rather than legislation.

What's next?

The SEC has opened a standard notice-and-comment period on the proposal. Industry participants, state regulators, and custody providers will have the opportunity to submit comments on the conditions governing self-custody, the role of state trust companies, and the use of on-chain records for compliance.

The comment window and the timeline for adoption will determine whether advisers gain a workable custody framework before the next legislative cycle, when the Clarity Act or a successor bill could return to the floor.