SEC Proposes Tailored Crypto Custody Rules for Advisers and Funds
The October 1 proposal would let advisers hold client crypto themselves and use state trust company custodians, revisiting a question the 2023 staff position statement left unsettled.
On October 1, the SEC proposed a package of rules and amendments under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 establishing what the agency describes as a "tailored framework" for crypto asset custody by registered advisers and funds. Per the summary available here, the proposal would permit adviser self-custody of client digital assets and would recognize state trust companies as qualified custodians, with corresponding implications for fund custody arrangements.
Why sophisticated counsel should care: custody has been the gating compliance question for tokenized funds and digital-asset advisory mandates, and the draft rules would reshape which custody models are permissible, what contractual terms advisers must negotiate with clients and counterparties, and how insurance, segregation and disclosure obligations are calibrated. The proposal arrives after the 2023 staff position statement that advisers could not place crypto with a customer's own custodian, so a finalized framework would represent a material reversal of staff position rather than a marginal adjustment.
What to watch: the release notes and adopting release text for comment-period mechanics, the treatment of self-custody conditions, and the state trust company qualification standard. Scope and detail are drawn from a single summary; confirm against the Federal Register text before advising clients.