The U.S. Securities and Exchange Commission on Thursday proposed a regulatory framework that would, in limited circumstances, let registered investment advisers and regulated funds self-custody crypto assets and use state trust companies as custodians.

The proposal targets a structural gap in the Advisers Act custody rules: qualified custodial infrastructure for certain crypto assets does not yet exist, leaving asset managers, hedge funds and fund sponsors without a compliant way to hold bitcoin and other digital assets directly rather than through an ETF or another intermediary.

"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," SEC Chairman Paul Atkins said in a release accompanying the proposal. "Unfortunately, our rules and regulations have not kept pace."

The framework would permit advisers to act as custodians for client and fund crypto assets under limited circumstances, including when the adviser determines that no permitted custodian is available.

What does 'self-custody' mean here?

SEC Commissioner Hester Peirce, who issued a separate statement on the proposal, clarified that the term refers to advisers acting as custodians for client assets — not to investors directly controlling their own keys.

"True self-custody is not the right choice for everyone, but many crypto owners prize being able to custody their own assets," Peirce said. "Regulators should zealously protect investors' right to self-custody and not attempt to force investors to custody their assets with someone else."

The proposal would also allow state trust companies to serve as custodians for both client and regulated fund crypto assets, expanding the universe of eligible institutions beyond the federal banking perimeter.

Why is the SEC acting now?

The move comes roughly two weeks after the Clarity Act, Congress's flagship crypto market-structure bill, failed to pass the Senate. Since that defeat, both the SEC and the Commodity Futures Trading Commission have accelerated rulemaking efforts. The SEC released its long-awaited innovation exemption on September 17, and the CFTC filed crypto asset rulemaking with the White House on September 18.

"More regulatory proposals are on the horizon, and I look forward to continuing to help President Trump cement the United States as the crypto capital of the world," Atkins said.

Nate Geraci, president of NovaDius, characterized the pace bluntly in a post on X: "Moving quickly & aggressively. Some politicians are going to wish they passed the Clarity Act."

For asset managers, the operational implications are direct. Advisers that previously had to route exposure through exchange-traded products or third-party custodians could hold crypto assets on balance sheet for clients, subject to the proposal's conditions. State trust companies gain a defined federal pathway to custody business.

The public comment period will remain open for 60 days, giving custodians, advisers and industry groups a fixed window to shape the final rulemaking before the Commission moves to adoption.