The US securities regulator has proposed easing rules governing how investment advisers and funds hold crypto, potentially clearing a regulatory hurdle that has held some businesses back from offering clients digital asset investments.
The proposal, published on Thursday, would let investment advisers hold clients’ crypto assets themselves when no eligible crypto custodian is available, with conditions. It would also allow state trust companies to serve as crypto custodians.
“The crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace,” US Securities and Exchange Commission Chair Paul Atkins said in a statement.
The proposal targets a practical barrier to crypto investment: investment advisers can struggle to find a qualified custodian for a particular token, limiting the investments they can offer clients.
The Digital Chamber has previously raised concerns about the lack of qualified crypto custodians. In a May 2025 submission to the SEC, the Digital Chamber said some advisers had declined token allocations or asked portfolio companies to retain them until custody became available.
In a statement on Thursday, SEC Commissioner Hester Peirce likened the uncertainty to a regulatory “roller coaster,” saying advisers have been “gritting their teeth and holding on for dear life” while awaiting workable custody rules.
Self-custody would come with safeguards
Under the SEC proposal, advisers seeking to hold clients’ crypto themselves would have to establish that no permitted custodian is available for each asset and reassess that determination quarterly. If a custodian becomes available, the assets would need to be transferred as soon as reasonably practicable.
Self-custody would also require safeguards around private keys, cybersecurity and separation of each client’s holdings. At least two authorized individuals would have to approve any transfer of a self-custodied crypto asset.
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SEC Commissioner Mark Uyeda said the proposal recognized that adviser custody creates “an inherent conflict of interest,” and that advisers’ fiduciary duties would continue to apply when they hold clients’ crypto.
The proposal would also allow regulated funds to maintain crypto assets in self-custody with their investment adviser, provided the adviser meets self-custody requirements and the fund’s board oversees the arrangement.
State trust company option
Using a state trust company — a financial firm authorized by a US state to look after assets on other people’s behalf — would carry separate conditions.
These include making sure the state trust company is authorized by the relevant state authority to provide crypto custody, has reasonable procedures to safeguard crypto assets from loss, theft or misappropriation and has audited financial statements and internal control reports and ensuring client holdings are segregated from the company’s own assets.
The package also proposes changes to audit, recordkeeping and disclosure requirements. The SEC will accept public comments for 60 days after the proposal is published in the Federal Register.
The latest proposal adds to a push by the SEC and Commodity Futures Trading Commission to set clearer rules for crypto under their existing powers after the CLARITY Act failed to advance in the Senate last month. The CFTC has submitted a crypto-market proposal for White House review, while the SEC has opened a path for trading tokenized stocks.
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