SEC Proposes Updated Custody Rule, Including Crypto Self-Custody
The SEC has proposed amendments to its custody rule that would permit qualified self-custody of crypto assets and codify the treatment of state trust companies for securities held for clients.
Per Faegre Drinker's October 2026 analysis, the Commission has advanced a proposal updating the SEC custody rule framework, following rescission of a prior proposal, with two headline elements: permission for self-custody of crypto assets under specified conditions, and codification of how state trust companies may hold client securities. The rule sits at the center of the broker-dealer and investment adviser compliance models, so the exposure is not confined to digital-asset firms; custody and safekeeping arrangements, third-party agreements, internal controls and surprise/examination practices at large advisers and retail brokers would all be implicated to the extent the proposal touches them. Client-facing consequences include the possibility of additional disclosure obligations, revised agreements with custodians, and questions about how advisers and brokers allocate responsibility for crypto assets that have no traditional intermediary. Counsel should treat the proposal as not final: the analysis available to us is a single law-firm summary, and we have not verified the full text of the release, the scope of the self-custody conditions, or the comment period. The concrete next step is to read the release text against current custody and safeguarding obligations, then track the comment deadline, trade-association letters, and any final adopting release, which would require conforming amendments to Form BD/ADV disclosures, contracts, and internal control frameworks.