SEC Proposes Adviser and Fund Self-Custody of Crypto Assets

The SEC published a release on October 1, 2026 proposing, subject to conditions, that investment advisers and regulated funds — including registered funds and business development companies — be permitted to self-custody crypto assets, alongside a broader overhaul of the existing custody framework for advisers, registered funds and BDCs.

Why sophisticated counsel should care: custody rules sit at the intersection of fiduciary duty, safekeeping liability, segregation and recordkeeping obligations. A shift from third-party custody toward self-custody, even conditioned on safeguards, would redraw the boundary between a manager's investment discretion and its asset-protection obligations, and would likely ripple into fund documentation, administrator and auditor scopes of work, insurance and indemnity provisions, and investor disclosures. Advisers and fund boards will want to assess whether current sub-custody arrangements, control environments and vendor contracts remain fit for purpose before any compliance period matures.

The proposal is only a first step: comments, counter-comments and possible amendments will shape the final rule, and the operational burden will fall largely on compliance, operations and finance functions.

Next to watch: the comment deadline and any adopting release, plus how conditions on self-custody are ultimately calibrated — particularly verification, liquidity and insolvency safeguards. We have not reviewed the full text of the Release; confirm specifics against the SEC's published version.