The U.S. Securities and Exchange Commission has released a new rule package governing crypto custody by registered investment advisers, according to Finextra Research.

The publication resolves a multi-year regulatory question about how crypto-native firms can serve as qualified custodians for advisers holding client digital assets. Advisers seeking to offer crypto strategies have until now operated against a Custody Rule written around traditional broker-dealers and banks.

What does the new framework cover?

The published rules define how crypto platforms and other non-bank entities qualify as custodians for advisers and what operational, recordkeeping and segregation standards those custodians must meet. The framework also addresses crypto-specific issues such as assets held through staking, lending or other on-chain activities.

Under the prior framework, advisers faced compliance risk when selecting crypto platforms as custodians because those platforms did not meet the structural criteria — bank or broker-dealer status, possession or control of assets, bankruptcy-remote segregation — that the Custody Rule has historically required.

Why did advisers press for clarity?

Registered advisers have asked the SEC for explicit custody guidance since at least 2021, when the agency first signaled it would address digital assets. Industry commenters argued the lack of a clear qualified-custodian pathway effectively prevented advisers from serving clients seeking crypto exposure through regulated accounts.

The absence of explicit standards produced uneven outcomes across firms. Some advisers treated state-chartered trust companies as qualified custodians. Others declined to offer crypto strategies altogether.

What changes for custodians and platforms?

Crypto custody firms now face a defined set of operational expectations. Platforms acting as qualified custodians for advisers must demonstrate capability across asset segregation, cybersecurity and audit functions and accept periodic examination by SEC staff.

Banks considering crypto custody will also feel the rules' effects. The publication follows Staff Accounting Bulletin 121, the SEC's 2022 guidance that required banks holding crypto for platform users to recognize the holdings as on-balance-sheet liabilities. Several large banks cited that treatment as a reason to scale back services.

What is the implementation timeline?

The rules take effect on a phased schedule following Federal Register publication, with compliance dates specified in the adopting release. Firms must update custody agreements, written policies and due diligence procedures to align with the new framework.

Advisers already offering crypto strategies will need to assess whether their current custodians meet the new qualified-custodian standard. Firms that fall short will need to transition client holdings, a process that requires coordination with auditors, tax advisers and blockchain-native operations teams.

The SEC's Division of Examinations is likely to incorporate the new custody standards into upcoming review priorities. Firms should expect examination focus on the qualified-custodian criteria in the next inspection cycle.