Short answer: On October 1, 2026, the U.S. Securities and Exchange Commission (SEC) proposed new custody rules that would let registered investment advisers and regulated funds hold crypto assets themselves, through their own private keys, when no qualified custodian is willing to hold a given token. The proposal also adds state-chartered trust companies to the list of approved crypto custodians. It is open for public comment for 60 days after publication in the Federal Register and is not yet in force.
What happened
On Thursday, October 1, 2026, the SEC released a package of custody proposals for investment advisers, registered funds and business development companies. SEC Chair Paul Atkins said the agency's rules "have not kept pace" with the market and promised more proposals. The core changes:
- Self-custody as a fallback. An adviser or fund could keep a crypto asset in its own wallet only after concluding in writing that no qualified custodian will hold that particular asset, and must repeat that check at least every quarter.
- State trust companies as custodians. State-chartered trust companies authorized by their banking regulator would become qualified custodians, limited to crypto assets and related cash.
- Broker-dealer custody for funds. Regulated funds could use any registered broker-dealer as a custodian under customer-protection rules, replacing older paperwork-heavy conditions.
- Housekeeping. The custody rule for advisers, Rule 206(4)-2, gets new exceptions, and the requirement that auditors be inspected by the PCAOB (the U.S. audit regulator) would be dropped.
Commissioner Hester Peirce clarified that "self-custody" here means the adviser acting as custodian for client assets, not individual investors holding their own coins.
The conditions for adviser self-custody
Self-custody is designed as a last resort, mainly for newer or thinly supported tokens that big custodians will not touch. An adviser that goes this route would have to:
- Document its safeguarding expertise and keep written systems for private key management.
- Require approval by at least two people for any transfer, so no single employee can move assets alone.
- Use separate blockchain addresses for each client.
- Review cybersecurity controls every year.
- Obtain an internal control report from an independent accountant within six months of starting self-custody, then annually.
- Send affected clients quarterly account statements.
- Agree with the client to treat each asset as a "financial asset" under state commercial law (UCC Article 8), which clarifies ownership if the adviser fails.
For funds, the board must review the finding that no qualified custodian is available.
How the 2026 proposal differs from the 2023 plan
The package replaces the "safeguarding" proposal floated in 2023 under former Chair Gary Gensler, which would have pushed nearly all crypto into qualified custodians that, for many tokens, did not exist. The SEC withdrew that plan in June 2025 without adopting it.
| Question | 2023 safeguarding proposal | 2026 custody proposal |
|---|---|---|
| Can an adviser hold keys itself? | Effectively no | Yes, as a documented fallback |
| State trust companies | Eligibility contested | Expressly added for crypto |
| Two-person approval | Not specified for self-custody | Required |
| Status | Withdrawn June 2025 | 60-day comment period |
The proposal came the same day spot bitcoin exchange-traded funds (ETFs) ended a nine-day inflow streak worth about $3 billion with roughly $149 million of net outflows, a reminder that institutional demand is real but not one-directional.
What it means for you
Until a final rule is adopted, current custody requirements stay in place. Practical points:
- Ask where your assets sit. If you invest through an adviser or fund with crypto exposure, the custodian and the custody method should be disclosed; the proposal adds new disclosures on Form ADV.
- Notice the security model. Two-person approval, per-client addresses and yearly reviews are good habits for anyone holding keys, not just regulated firms.
- Self-custody for individuals is unchanged. The rule governs advisers, not you; holding your own wallet and swapping coins remains your choice.
- Comment if you care. The 60-day window is open to anyone once the release appears in the Federal Register.
Key takeaways
- The SEC proposed crypto custody rules for advisers and funds on October 1, 2026.
- Advisers could self-custody a token only if no qualified custodian will hold it, rechecked quarterly.
- State trust companies would be added as qualified crypto custodians.
- A 60-day comment period follows Federal Register publication; nothing changes yet.
For the security basics behind any self-custody setup, see our crypto wallet security guide, and for who controls the keys in different models, read DeFi vs CeFi.
Frequently asked questions
What did the SEC propose on crypto custody in October 2026?
On October 1, 2026, the SEC proposed rules letting registered investment advisers and regulated funds self-custody crypto when no qualified custodian will hold an asset, adding state trust companies as qualified custodians and modernizing other custody provisions.
Can investment advisers hold bitcoin themselves under the SEC proposal?
Only as a fallback. The adviser must find in writing, at least quarterly, that no qualified custodian will hold the asset, and must meet conditions such as two-person approval, client-specific addresses and annual independent accountant reports.
When will the SEC crypto custody rule take effect?
There is no effective date yet. The proposal has a 60-day public comment period after Federal Register publication, and the SEC has not said when a final rule could be adopted.
