The US Securities and Exchange Commission on Thursday published a proposal letting registered investment advisers hold clients' crypto assets themselves when no qualified custodian is available, a shift aimed at removing a practical barrier that has limited advisers' ability to offer digital asset products.

The same package would permit state-chartered trust companies to serve as qualified crypto custodians under defined conditions. The agency will accept public comments for 60 days after the rule text appears in the Federal Register.

"The crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure," SEC Chair Paul Atkins said in a statement. "Unfortunately, our rules and regulations have not kept pace."

What problem is the SEC trying to solve?

Investment advisers often cannot find a custodian willing or able to take custody of a specific token, which has forced some firms to decline allocations for clients.

The Digital Chamber, a trade group, told the SEC in a May 2025 submission that some advisers had passed on token allocations or asked portfolio companies to retain holdings until qualified custody became available.

The proposal directly addresses that gap. An adviser that wants to self-custody a client's crypto would first document that no permitted custodian is available for that specific asset, and reassess the determination every quarter. If a qualified custodian later becomes available, the assets would need to move "as soon as reasonably practicable," according to the proposal.

What safeguards would self-custody carry?

The rule would impose a set of operational requirements on advisers that opt for self-custody:

• Documented procedures for safeguarding private keys
• Cybersecurity controls
• Segregation of each client's holdings from the adviser's own assets
• A requirement that at least two authorized individuals approve any transfer

The proposal also lets regulated funds maintain crypto with their investment adviser, provided the adviser meets the self-custody standard and the fund's board oversees the arrangement.

How would state trust companies fit in?

The package sets a parallel track for state trust companies, firms authorized by a US state to hold client assets. To qualify as a crypto custodian, such a company would need:

• Authorization from the relevant state regulator to provide crypto custody
• Procedures to safeguard assets from loss, theft or misappropriation
• Audited financial statements and internal-control reports
• Segregation of client holdings from the firm's own balance sheet

How did the commission frame the change?

SEC Commissioner Hester Peirce likened the prior uncertainty to a regulatory "roller coaster," saying advisers have been "gritting their teeth and holding on for dear life" while awaiting workable custody rules.

Commissioner Mark Uyeda said the proposal recognizes that adviser custody creates "an inherent conflict of interest" and that fiduciary duties continue to apply when advisers hold client crypto.

The commission approved the proposal for public comment alongside related changes to audit, recordkeeping and disclosure requirements that apply to crypto held by funds and advisers.

Where does this fit in the broader rulemaking push?

The custody proposal is the latest in a series of agency moves to set clearer crypto rules under existing authority. The Senate failed to advance the CLARITY Act, a market-structure bill, last month, leaving regulators to fill the gap.

The Commodity Futures Trading Commission has submitted a separate crypto-market proposal for White House review, and the SEC has opened a path for trading tokenized stocks. The 60-day comment window that opens with Federal Register publication will set the timetable for any final rule, and determine when advisers can begin relying on the new custody framework.