---
title: "SEC Proposes Overhaul of Crypto Custody Rules for Investment Advisers and Funds"
description: "The proposed framework establishes paths for state trust companies and conditional self-custody while updating audit requirements under federal securities laws."
url: https://basisdesk.news/news/sec-proposes-crypto-custody-rules-investment-advisers-funds
published: 2026-10-01T19:56:56.950Z
modified: 2026-10-01T19:56:56.950Z
section: Regulation & Policy
author: Basis Desk Newsroom (AI-generated, source-verified)
sentiment: bullish
tickers: [BTC, ETH]
tags: [sec, custody, regulation, institutional-investors, investment-advisers]
license: Quote with attribution to Basis Desk (basisdesk.news). Not financial advice.
---

# SEC Proposes Overhaul of Crypto Custody Rules for Investment Advisers and Funds

The proposed framework establishes paths for state trust companies and conditional self-custody while updating audit requirements under federal securities laws.

## Key points

- The SEC proposed rules under the 1940 Acts to establish a tailored crypto custody framework for advisers and funds.
- The proposal permits the use of state trust companies as custodians and allows conditional self-custody for crypto assets.
- A 60-day public comment period will begin once the proposing release is published in the Federal Register.

## Editorial remark

- **Context:** Federal custody rules drafted decades ago left registered investment advisers and regulated funds without explicit, modernized pathways to hold digital assets under the 1940 Acts.
- **Impact:** Registered investment advisers, registered investment companies, and business development companies gain regulatory clarity, enabling compliant custody solutions via state trust companies or qualified self-custody setups.
- **Watch:** The publication of the proposing release in the Federal Register, which initiates the official 60-day public comment period.

The US Securities and Exchange Commission proposed new rules and statutory amendments on Oct. 1 to establish a dedicated crypto custody framework for registered investment advisers and regulated funds [1]. The initiative updates mandates under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 to remove regulatory barriers limiting investment advisers from offering crypto-related advice [1]. Regulated funds, including registered investment companies and business development companies, would also gain expanded flexibility to provide clients with crypto-related strategies [1]. At the time of writing, digital asset markets held steady, with $BTC trading at $84,640 and $ETH at $2,700.

Under the Commission's proposal, registered entities would be authorized to use state trust companies as custodians for client and regulated fund crypto assets [1]. The provisions also permit entities to hold crypto assets in self-custody under specific conditions [1]. Furthermore, the SEC's draft package revises rules concerning broker-dealer custodial services for funds and updates financial statement audit obligations that apply to registered investment advisers [1].

SEC Chairman Paul S. Atkins stated that while the digital asset market has matured into a multi-trillion-dollar asset class since Bitcoin's creation in 2008, regulatory standards had previously failed to keep pace [1]. Atkins noted that the rulemaking is designed to provide a compliant operational path to replace regulatory uncertainty [1]. This development ties into wider agency oversight covered in Basis Desk's review of [US crypto regulation](https://basisdesk.news/news/us-crypto-regulation-overview) and ongoing regulatory coordination, including the [SEC and CFTC Joint Interpretation on Crypto Securities Laws](https://basisdesk.news/news/sec-cftc-joint-interpretive-release-crypto-securities).

The SEC confirmed that the public comment window will stay open for 60 days following the publication of the proposing release in the Federal Register [1].

## FAQ

**What does the SEC's custody proposal permit?**

The proposal permits registered investment advisers and regulated funds to use state trust companies as custodians and allows crypto assets to be held in self-custody under specific conditions.

**How long is the public comment period?**

The public comment period will remain open for 60 days following the publication of the proposing release in the Federal Register.

## Sources

1. [SEC Proposal Would Address How Investment Advisers and Funds Can Custody Crypto Assets Under the Federal Securities Laws](https://www.sec.gov/newsroom/press-releases/2026-100-sec-proposal-would-address-how-investment-advisers-funds-can-custody-crypto-assets-under-federal) — SEC Press Releases, 2026-10-01

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