The US Securities and Exchange Commission (SEC) on October 1, 2026, advanced a package of proposed amendments and new provisions under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 aimed at creating a workable path for registered investment advisers and regulated funds to hold crypto assets.
Release IA-7023 and IC-36353 (File No. S7-2026-35) would let advisers maintain client crypto in limited self-custody when no permitted custodian is available, authorize state-chartered trust companies to serve as custodians for such assets under defined conditions, and modernize long-standing custody requirements that were drafted for traditional securities.
Under the self-custody option, an adviser could hold a client’s crypto only after documenting that no qualified custodian will maintain the asset, with that determination refreshed quarterly.
The adviser alone would control the private keys.
Additional safeguards would include demonstrated expertise in safeguarding, cybersecurity controls, annual internal reviews, client account statements, and clear disclosures.
Cost would not justify the choice, and assets would have to move to a permitted custodian once one became reasonably available.
State trust companies could also qualify, provided the adviser or fund has a reasonable basis, after due inquiry and on an ongoing basis, that the company is authorized by its state banking regulator and maintains written policies designed to protect assets from theft, loss, or misappropriation.
Chairman Paul S. Atkins described the package as closing a gap that left advisers and funds without a compliant route for an asset class clients increasingly request, noting that existing rules contemplated only traditional instruments.
Commissioner Mark T. Uyeda contrasted the approach with a 2023 proposal he viewed as creating a practical dead end for crypto, arguing the new text recognizes that novel tokens may lack willing custodians while still applying fiduciary duties and conflict safeguards.
Commissioner Hester Peirce supported the direction while noting a preference for terminology that distinguishes adviser-held assets from individual key control.
The comment period runs 60 days after Federal Register publication.
Observers on X framed the proposal as infrastructure rather than a finished rule.
One commenter observed that advisers have long told clients they cannot hold certain crypto, and clearer custody standards could remove that barrier for retirement and advisory capital.
Another noted that the text treats adviser key control as an exception requiring quarterly reconfirmation and competence, not a default.
A third highlighted that many institutions already possess conviction but lack setups risk committees can approve, positioning custody clarity alongside collateral and settlement as a practical unlock.
Parallel discussions on professional networks such as LinkedIn have echoed the compliance angle: counsel and operations leads have emphasized the need to map quarterly determinations, key-management policies, and disclosure language before any self-custody reliance, while questioning whether state-trust diligence will prove lighter or heavier than existing bank custodian reviews in practice.
The US proposal sits against more prescriptive frameworks elsewhere. In the European Union, the Markets in Crypto-Assets Regulation treats custody and administration of crypto-assets or the means of access to them as a licensable crypto-asset service.
Authorized providers must segregate client assets, maintain custody agreements, and report positions at least quarterly; the regime emphasizes governance and bankruptcy remoteness rather than a fixed cold-storage percentage.
In Asia, Singapore’s Monetary Authority of Singapore (MAS) guidance has pointed to high cold-wallet ratios (around 90 percent in some interpretations) together with segregation and trust arrangements, while Hong Kong’s Securities and Futures Commission has required roughly 98 percent of client virtual assets in cold storage for licensed platforms, with separate capital and custody-licensing consultations underway.
Japan has imposed cold wallet thresholds near 95 percent for exchanges under its Payment Services Act.
Australia’s regime remains more principles-based under ASIC oversight, with ongoing work on licensing for digital-asset platforms but without the same numeric cold-storage mandates.
In Latin America, Brazil’s 2022 crypto-assets law and central bank implementing rules establish authorization and segregation expectations for virtual-asset service providers, while other jurisdictions range from partial AML-focused oversight to fuller licensing; none yet match the EU’s single-market passport or Hong Kong’s explicit cold-storage ratio.
These differences matter because custody failures have repeatedly stalled institutional uptake.
Mt. Gox’s collapse involved roughly 850,000 bitcoin missing after years of undetected leakage and falsified balances.
The 2022 failures of Celsius, Voyager, BlockFi, and Genesis, followed by FTX’s roughly $8 billion customer shortfall tied to misuse of deposits, showed that exchange and lender balance-sheet risks—not protocol failures—destroyed client funds.
Institutional allocators cite the absence of clear, auditable custody chains and the history of mismanagement as primary reasons mandates remain small relative to traditional assets.
By offering a conditional self-custody fallback and an expanded state-trust pathway, the SEC proposal attempts to reduce that friction for advisers and funds, though final adoption, comment revisions, and parallel broker-dealer rules will determine whether the pathway is broad enough to shift significant capital.