The U.S. Securities and Exchange Commission on October 1, 2026, proposed a formal custody framework permitting registered investment advisers (RIAs) and regulated funds to self-custody client crypto assets under limited conditions. The proposal, released as SEC Press Release 2026-100 and filed un...
The U.S. Securities and Exchange Commission on October 1, 2026, proposed a formal custody framework permitting registered investment advisers (RIAs) and regulated funds to self-custody client crypto assets under limited conditions. The proposal, released as SEC Press Release 2026-100 and filed under 17 CFR Parts 270, 274, 275, and 279, amends rules under both the Investment Advisers Act of 1940 and the Investment Company Act of 1940. It replaces a September 30, 2025, no-action letter that lacked binding legal authority.
The proposal arrives at a time when institutional crypto custody infrastructure is expanding rapidly. Bitcoin spot ETFs alone hold approximately $113.4 billion in assets under management, with combined crypto spot ETF AUM reaching $173.8 billion. Coinbase Custody manages roughly $300 billion in assets under custody; BitGo holds $104 billion-plus. The crypto custody provider market is valued at approximately $3.7 billion in 2026, according to Research and Markets. The SEC's rule, if finalized, would formalize institutional pathways that have operated in a regulatory grey zone since Bitcoin's earliest institutional adoption.
A 60-day public comment period begins upon Federal Register publication. The final rule's definition of "qualified custodian" will determine whether the framework benefits crypto-native custody firms or primarily consolidates custody within traditional banking institutions.
The SEC's proposal targets a structural gap: existing custody rules under the Investment Advisers Act and the Investment Company Act were drafted before digital assets existed. They define "qualified custodians" as banks, broker-dealers, futures commission merchants, and certain foreign financial institutions. Crypto assets fit uneasily into these categories.
Under the current framework, an RIA holding client crypto must place those assets with a qualified custodian. For many crypto assets — particularly those on newer chains or with limited institutional infrastructure — no qualified custodian exists. This creates a compliance dead zone where advisers cannot legally hold assets clients want exposure to.
The October 1 proposal addresses this in two ways:
The proposal also updates related reporting and recordkeeping rules, including financial statement audit requirements for RIAs and broker-dealer custodial service rules for regulated funds. It applies to registered investment companies and business development companies in addition to advisory clients.
The self-custody provision is not a blanket authorization. It is a fallback pathway available only when no third-party qualified custodian can hold the relevant asset. The conditions are prescriptive:
Commissioner Hester Peirce, in her October 1 statement titled "Roller Coaster Ride," clarified the terminology: the proposal uses "self-custody" to mean advisers acting as custodians for client assets, not investors controlling their own crypto directly. Peirce said she would have preferred "shelf-custody" to avoid conflating adviser-held custody with the concept of individual self-sovereignty over assets. As Peirce noted: "True self-custody is not the right choice for everyone, but many crypto owners prize being able to custody their own assets."
The second pathway recognizes state-chartered trust companies as eligible to hold advisory client and fund crypto assets. This formalizes what a September 30, 2025, no-action letter from the Division of Investment Management had temporarily permitted.
Requirements for state trust company custody:
This provision directly benefits firms like Anchorage Digital (a federally chartered trust company), Wyoming-chartered entities operating under the state's Special Purpose Depository Institution framework, and similar state-regulated custodians. BitGo and Coinbase both received OCC conditional approvals in late 2025 and early 2026, potentially positioning them as eligible under this framework depending on the final rule's definitions.
The October 2026 proposal is the latest in a multi-year regulatory sequence:
| Date | Event | |------|-------| | March 2022 | SEC issues SAB 121, requiring institutions to record custodied crypto as liabilities on their balance sheets. Industry criticizes the rule as effectively prohibiting bank custody. | | March 2023 | SEC proposes the Safeguarding Advisory Client Assets rule (voted 4-1). The proposal would have required advisers to place every client asset — including crypto — with an approved custodian while narrowing the list of eligible custodians. | | January 23, 2025 | SEC rescinds SAB 121, removing the balance-sheet liability requirement for custodied crypto. Acting Chair Mark Uyeda oversees the reversal following Gary Gensler's resignation. | | June 17, 2025 | SEC formally withdraws the 2023 Safeguarding Rule. It was among 14 rulemakings withdrawn that year. | | September 30, 2025 | Division of Investment Management issues no-action letter permitting state trust companies to serve as qualified custodians for crypto under specified conditions. | | August 25, 2026 | SEC submits the revised crypto custody rule to the White House Office of Management and Budget (OMB) for review. | | October 1, 2026 | SEC publishes the formal proposal (Press Release 2026-100). The 60-day comment period begins upon Federal Register publication. |
The trajectory is clear: the SEC moved from a posture that made institutional crypto custody harder (SAB 121, the 2023 Safeguarding Rule) to one that provides explicit pathways. The shift corresponds with the change in SEC leadership from Gensler to Atkins.
The proposal enters a market where institutional crypto custody is already a multi-hundred-billion-dollar operation:
The crypto custody provider market itself is valued at $3.7 billion in 2026, according to The Business Research Company, with projections reaching significantly higher by 2030. This figure captures custody-as-a-service revenue, not the value of assets held.
The regulatory gap the SEC's proposal addresses is not theoretical. Advisers managing billions in crypto for clients have operated under a patchwork of staff guidance, no-action letters, and interpretive bulletins — none of which carry the force of a formal rule.
Chairman Atkins framed the proposal as overdue modernization. His statement emphasized that the crypto asset market "has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure." The proposal, per Atkins, replaces "the grey of uncertainty created by custody rules crafted for a bygone era."
Commissioner Peirce, while supportive, flagged concerns about the self-custody provisions being too narrow. Her "Roller Coaster Ride" statement described investment advisers' experience with crypto custody as a "terrifying" regulatory journey. She supported the proposal but noted a preference for broader self-custody allowances and clearer terminology.
Peirce's departure from the SEC is imminent, and this proposal represents one of her final regulatory actions at the agency. Her long advocacy for crypto-friendly regulation — earning her the informal moniker "Crypto Mom" — has shaped much of the current commission's posture.
The SEC currently operates with reduced leadership capacity. Only two Republican commissioners remain following a key departure, leaving the commission with limited bandwidth for the volume of crypto rulemaking underway.
The comment period will be contested. Several dimensions of the proposal remain undefined in the text and will be shaped by industry feedback:
Qualified custodian definition. Whether the final rule's definition of "qualified custodian" includes crypto-native firms (BitGo, Anchorage, Fireblocks) or effectively restricts custody to traditional banking institutions will determine the competitive landscape. If traditional banks are favored, value concentration in custody will accelerate toward a small number of institutions.
Self-custody threshold. The quarterly certification that no qualified custodian is available creates a moving target. As more firms seek custodian status, the window for self-custody could narrow progressively. Advisers may find the self-custody option available today but foreclosed within 12-18 months as custodial infrastructure expands.
Interaction with other rulemaking. The SEC has issued parallel proposals on tokenized securities venues (the Innovation Exemption for stock tokens, already straining Robinhood's volume caps), the crypto assets framework (Press Release 2026-76), and stablecoin-adjacent custody requirements under GENIUS Act implementation. How these rules interact — particularly around what constitutes a "crypto asset" versus a "tokenized security" — will determine whether custody rules create a unified framework or a fragmented compliance burden.
International competitiveness. The EU's MiCA framework already specifies custody requirements for crypto-asset service providers. The UK FCA's licensing system, which took effect in October 2026, includes its own custodial standards. The SEC's final rule will be benchmarked against these frameworks by global institutions deciding where to domicile custody operations.
The SEC's October 1 custody proposal formalizes what the market has been building toward for three years. Institutional crypto custody is not speculative infrastructure — it is operational at the $300 billion-plus level. The regulatory question was never whether institutions would hold crypto, but under what framework.
The proposal provides two pathways — adviser self-custody and state trust company custody — while maintaining prescriptive safeguards. The comment period will be decisive. The definition of "qualified custodian" will allocate market access between crypto-native firms and traditional banks. The self-custody threshold will determine whether advisers retain operational flexibility or are pushed toward third-party custodians as infrastructure expands. These are structural choices with multi-billion-dollar implications for value distribution in the custody layer.
The economic question, consistent with how value flows in blockchain ecosystems, is where the custody fee revenue concentrates. If the final rule narrows custodian eligibility to a handful of bank-chartered entities, custody fees — currently distributed across dozens of specialized providers — could consolidate. If the definition is broad enough to include crypto-native firms, the competitive landscape preserves the current structure. The comment period runs 60 days from Federal Register publication. The outcome will set the institutional custody framework for the next cycle.