The U.S. Securities and Exchange Commission proposed on Oct. 1 a rule that would let registered investment advisers hold certain client crypto assets themselves when no qualified custodian will accept them, subject to written safeguards and joint-authorization controls. Release IA-7023 also opens an explicit rule-based route for custody through state trust companies and covers regulated funds.

Comments are due 60 days after publication in the Federal Register, after which the agency will weigh changes before any adoption.

What does the proposal permit?

The current adviser custody rule generally requires client funds and securities to sit with qualified custodians — banks, savings associations, registered broker-dealers, registered futures commission merchants and certain foreign financial institutions. The new text keeps that focus on funds and securities. According to the SEC release, native bitcoin, ether and SOL generally fall outside that scope for clients other than regulated funds. Funds face the broader category of "securities and similar investments," which can include those assets.

The rule targets a recurring operational obstacle: a digital token can be ready for investment before any qualified custodian supports it.

How would self-custody work in practice?

An adviser would first need to document a reasonable basis, after due inquiry, for believing no qualified custodian will hold the specific asset, and reassess at least quarterly. Custodian fees alone would not justify the determination. If a custodian becomes available later, the adviser would have to transfer the asset as soon as reasonably practicable.

What conditions does the SEC attach?

The agency's fact sheet sets out the operational conditions:

• Documented safeguarding expertise, private-key controls and joint transaction authorization by at least two people
• Separate onchain addresses for each client
• Annual review of safeguarding and cybersecurity systems
• An independent accountant's internal-control report within six months of starting self-custody, then annually
• Quarterly client statements
• A written agreement between adviser and client treating the crypto as a "financial asset" for additional state-law protections

Regulated-fund boards would carry additional oversight duties under the proposal.

Where do state trust companies fit?

For state trust company custody, advisers would need initial and annual due diligence on state authorization and safeguarding policies, plus review of audited financial statements and internal-control reports. Client crypto would have to remain segregated from the trust company's own assets.

That route builds on September 2025 staff relief — a Simpson Thacher no-action letter dated Sept. 30, 2025 — that conditionally let advisers and funds treat those entities as banks without an enforcement recommendation from SEC staff. The letter did not change the law. The new proposal would put a conditional route into the custody rules themselves.

How does this differ from the 2023 plan?

The SEC's 2023 safeguarding proposal would have expanded the adviser rule to all client assets, including crypto that was neither funds nor securities, while keeping qualified-custodian requirements intact. The agency withdrew that proposal in June 2025. The October text instead adds a crypto-specific self-custody exception without that across-the-board expansion. The new custody rewrite entered White House review in August before the public release.

The next operational step is the comment window, closing 60 days after Federal Register publication. After that, advisers and fund boards will watch for a final rule that codifies the September 2025 staff relief into binding text and clarifies which assets the exception reaches.