The SEC submitted proposed amendments to its custody rules to the White House Office of Management and Budget on August 25, 2026, initiating formal interagency review of the most consequential regulatory action for digital asset safekeeping since the rescission of SAB 121 in January 2025. The dra...
"We need to continue doing what we are doing — providing clarity about how tokenized securities interact with existing regulation and how intermediaries dealing with tokenized securities can trade and custody them on behalf of their clients." — Paul Atkins, Chairman, U.S. Securities and Exchange Commission
The SEC submitted proposed amendments to its custody rules to the White House Office of Management and Budget on August 25, 2026, initiating formal interagency review of the most consequential regulatory action for digital asset safekeeping since the rescission of SAB 121 in January 2025. The draft, titled "Amendments to the Custody Rules," would redefine how investment advisers and investment companies hold crypto assets for clients, with particular focus on the definition of "qualified custodian" — a designation that will determine which entities can legally safeguard the estimated $92.4 billion in U.S. spot Bitcoin ETF assets alone.
The rulemaking replaces a withdrawn Gensler-era proposal that would have effectively excluded most crypto-native platforms from custody eligibility. Under Chair Atkins, the SEC has signaled intent to "remove burdens from certain outdated provisions," suggesting a framework more accommodating to the five crypto firms that received conditional OCC national trust bank charters in December 2025: BitGo, Fidelity Digital Assets, Paxos, Ripple, and Circle. Publication is expected by October 2026, with a minimum 60-day public comment window.
The outcome carries systemic implications. Coinbase Custody currently holds bitcoin for nine of twelve U.S. spot BTC ETFs, representing approximately $74 billion or 80.8% of all ETF-held BTC — a single-counterparty concentration that regulators, ETF issuers, and institutional allocators have flagged as structural risk.
The SEC submitted the draft to the Office of Information and Regulatory Affairs (OIRA), a division of the Office of Management and Budget, on August 25, 2026. OIRA review is a mandatory checkpoint before the Commission can vote to publish a proposed rule and open it for public comment. The full proposal text remains private during this review period.
According to the SEC's 2026 regulatory agenda published on July 7, 2026, the agency expects to publish the proposed rulemaking no later than October 2026. Once published, a minimum 60-day comment period will follow. A second Commission vote and additional analysis would then be required before finalization, placing full implementation potentially years out.
The rulemaking has been classified as an "economically significant regulation" — a designation reserved for rules with an annual effect on the economy of $200 million or more, or that raise novel policy issues. This classification ensures heightened executive branch scrutiny but also signals the SEC's own assessment of the rule's market impact.
Context matters. In August 2023, the SEC under then-Chair Gary Gensler proposed what it called the "Safeguarding Advisory Client Assets" rule. The proposal would have redesignated existing Rule 206(4)-2 — the custody rule under the Investment Advisers Act — as new Rule 223-1, expanding its scope from funds and securities to all client assets, including digital assets, cash, and real assets.
The 2023 proposal would have required investment advisers to place client cryptocurrency exclusively with "qualified custodians" defined narrowly as chartered banks and trust companies, SEC-registered broker-dealers, or futures commission merchants regulated by the CFTC. This definition would have effectively barred most crypto-native custody platforms from serving institutional clients.
The proposal drew broad opposition from both traditional finance and crypto industry participants. Critics argued it would make crypto custody prohibitively expensive for smaller advisers and create an artificial bottleneck favoring incumbents. By 2024, Gensler himself directed staff to modify the proposal. On June 12, 2025, the SEC under Chair Atkins formally withdrew the safeguarding proposal along with 13 other unfinished Gensler-era rules, stating that any future action would require an entirely new rulemaking.
The current proposal is that new rulemaking — built from scratch under a different regulatory philosophy.
The central variable in the upcoming rule is how the SEC defines "qualified custodian" for purposes of digital asset custody. The existing custody rule under 206(4)-2 recognizes banks, registered broker-dealers, registered futures commission merchants, and certain foreign financial institutions as qualified custodians. The question is whether crypto-native entities — particularly those now holding OCC national trust bank charters — will receive explicit recognition.
According to CoinDesk's analysis of the rulemaking, the qualified-custodian definition "will set the rules for how Bitcoin is held, by whom, and under what conditions, long before Congress acts." This framing underscores a key dynamic: the SEC is moving ahead of the stalled CLARITY Act, which was delayed by partisan disagreements and banking opposition ahead of the August 2026 Congressional recess, with a procedural vote pushed to September 15, 2026.
The SEC indicated the rulemaking would "clarify the framework for the custody of crypto assets for investment advisers and investment companies, as well as make other modernizations needed to remove burdens from certain outdated provisions." The phrase "remove burdens" has been interpreted by industry observers as signaling a more permissive posture toward crypto-native custodians than the Gensler-era approach.
On December 12, 2025, the Office of the Comptroller of the Currency granted conditional approval for five national trust bank charter applications from crypto-focused firms. Two were de novo charters (First National Digital Currency Bank and Ripple National Trust Bank) and three were conversions from state trust companies (BitGo Bank & Trust, Fidelity Digital Assets, and Paxos Trust Company).
These charters do not permit deposit-taking, checking or savings accounts, or FDIC insurance access. They do, however, allow the firms to hold and manage customer assets under federal supervision — and critically, they position these entities to meet the "chartered bank or trust company" prong of the existing qualified custodian definition.
BitGo's charter approval also included permission to issue a U.S. dollar-backed stablecoin under 12 USC 27(a). Fidelity Digital Assets, already the sole in-house custodian among major Bitcoin ETF issuers through its FBTC product ($11.22 billion AUM), now holds both state and federal trust charters.
The OCC charters effectively created a new class of federally supervised crypto custodians. If the SEC's forthcoming rule recognizes these entities explicitly, it would formally end the regulatory ambiguity that has kept institutional capital concentrated among a small number of providers.
As of April 2026, Coinbase Custody held bitcoin for nine of the twelve U.S. spot Bitcoin ETFs, accounting for approximately $74 billion — 80.8% of all ETF-held BTC, according to CryptoSlate analysis. By a broader measure including indirect arrangements, the figure reaches $77.1 billion or 84.1%.
Only Fidelity's FBTC ($11.22 billion AUM) uses an alternative custodian — its own Fidelity Digital Assets subsidiary. Some ETF sponsors have disclosed backup custodians, but these arrangements have not resulted in meaningful redistribution of actual holdings.
BlackRock's IBIT, the dominant product at $59.09 billion AUM, uses Coinbase Custody. Grayscale's GBTC ($10.35 billion), Bitwise's BITB ($2.99 billion), ARK's ARKB ($2.70 billion), and Grayscale's Mini Trust ($4.12 billion) all rely on Coinbase as well.
The concentration has drawn attention from analysts and regulators. Agio Ratings, which ranks custodians by default risk, noted that Coinbase's custody concentration has become a "choke point" — a single operational failure, regulatory action, or security breach would simultaneously affect the majority of U.S. Bitcoin ETF products. The SEC's custody rule rewrite may address this concentration risk by expanding the pool of qualified custodians, thereby giving ETF sponsors viable alternatives.
The global crypto custody provider market is projected to reach $3.69 billion in 2026, according to The Business Research Company. The institutional segment specifically was valued at $1.41 billion in 2025, with projections reaching $14.4 billion by 2034 at a 29.4% compound annual growth rate, per Intel Market Research.
As of 2025, crypto-native qualified custodians held 47.62% of the digital asset custody market share. Traditional financial institution custodians are projected to grow at a 27.87% CAGR through 2031, suggesting a gradual shift in market composition.
Over 70% of institutional investors have increased or plan to increase allocations to digital assets, according to Grand View Research, creating sustained demand for custody services that meet fiduciary standards.
The competitive dynamics are shifting. BNY Mellon, the world's largest traditional custodian with $46 trillion or more in assets under custody, has entered the space. Insurance coverage varies significantly: BitGo offers up to $250 million, Anchorage Digital provides $350 million or more, and Fidelity Digital Assets benefits from its parent company's $4 trillion-plus balance sheet. The SEC's rule will determine which of these entities can serve the growing pool of registered investment advisers seeking crypto exposure for client portfolios.
While the full text remains private, the SEC's public statements and the regulatory trajectory suggest several probable elements:
Qualified custodian eligibility. The rule is expected to clarify whether OCC-chartered national trust banks focused on digital assets qualify as custodians under the Investment Advisers Act. Given the five December 2025 charter approvals, explicit recognition would be consistent with the administration's stated policy of making the U.S. "the crypto capital of the world."
Segregation and bankruptcy remoteness. The SAB 121 rescission in January 2025 (replaced by SAB 122) removed the requirement for custodians to carry client crypto as balance-sheet liabilities. The custody rule may codify segregation requirements that protect client assets in a custodian insolvency scenario without reimposing the balance-sheet burden.
Audit and reporting standards. Investment advisers currently face uncertainty about how to demonstrate compliance with custody obligations for crypto assets. The rule may establish specific audit, verification, and reporting procedures tailored to blockchain-based assets.
Multi-custodian arrangements. Given the Coinbase concentration risk, the SEC may encourage or require diversification of custody across multiple qualified custodians for funds above certain asset thresholds.
The SEC's custody rule amendment represents the most significant regulatory action for digital asset safekeeping since the January 2025 SAB 121 rescission. The rule's definition of "qualified custodian" will determine whether the five OCC-chartered crypto firms can compete for the institutional custody market currently dominated by Coinbase — and whether the $74 billion ETF concentration risk receives a structural remedy.
The timeline is measured in quarters, not days. OIRA review, Commission vote, a 60-day comment period, and final rulemaking place implementation well into 2027 at the earliest. But the signal is immediate: the SEC is building the regulatory infrastructure for institutional crypto custody through administrative action, moving ahead of a Congress that has failed to pass comprehensive digital asset legislation.
For investment advisers managing client portfolios with crypto exposure, the practical impact hinges on whether the rule expands the qualified custodian pool sufficiently to create genuine competition — or whether it merely codifies the current oligopoly with a federal seal.