The U.S. Securities and Exchange Commission on October 1, 2026 proposed rules that would let registered investment advisers and funds hold crypto assets for clients, including a conditional self-custody path and recognition of state trust companies as qualified custodians. Chairman Paul Atkins said the agency’s existing rules “have not kept pace” with digital assets.
What did the SEC propose on October 1?
According to the SEC’s press release (2026-100), the Commission voted to propose rules and amendments under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 that create a custom structure for how advisers and regulated funds custody digital assets. The package would remove obstacles to crypto-related advice and allow funds to offer more crypto-linked strategies, the SEC said. The scope reaches registered investment advisers, registered investment companies and business development companies. Crucially, it is a proposal, not a final rule: the Commission is seeking public comment before anything is finalized, and the obligations described would not bind firms unless and until a final rule is adopted. CoinDesk and The Block framed the move as the SEC advancing a crypto rulebook under existing authority while Congress’s market-structure bill remains stalled, and the law firm Latham & Watkins described the release as a broad modernization of the custody regime alongside its new crypto-specific provisions.
How would the conditional self-custody path work?
The proposal’s most-discussed feature is a narrow route to self-custody. As summarized in the SEC release and legal analyses of the text, an adviser could maintain a client’s crypto assets itself, but only after determining in writing that no qualified custodian will maintain the asset, only for as long as that remains true, and only where the adviser alone controls the private keys. Additional conditions reported in Latham’s and other firms’ summaries include safeguarding expertise, documented private-key management controls, joint authorization of transactions, cybersecurity measures and periodic internal control reports. The intent, according to the SEC, is to cover assets that established custodians will not hold rather than to encourage self-custody broadly, and the written-determination requirement is designed to keep the exception narrow and auditable rather than a default option.
Which custodians would qualify under the plan?
The proposal would expand who counts as a qualified custodian for crypto. Reuters and law-firm summaries note that state trust companies would be recognized as qualified custodians under the Advisers Act and as permitted custodians under the Investment Company Act. That change is significant because several large digital-asset custody providers operate as state-chartered trust companies, and the status question had left advisers uncertain whether using them satisfied the custody rule. By naming state trust companies explicitly, the SEC would give advisers a clearer roster of eligible custodians and reduce the compliance ambiguity that had discouraged some firms from offering crypto exposure to clients at all.
What else does the proposal change?
Beyond crypto, the release carries broad amendments to the adviser custody framework. Latham & Watkins and other summaries list the elimination of the PCAOB registration-and-inspection requirement for accountants performing surprise examinations, a new exception tied to discretionary trading authority, extended audit deadlines for funds of funds, and a streamlined approach to broker-dealer custody of fund assets. Taken together, these pieces modernize rules that predate digital assets. The Commission framed the digital-asset elements as filling a gap, with Chairman Atkins quoted in the release saying the plan would give advisers and funds “a compliant pathway where none existed before” and adding that the agency’s rules “have not kept pace” with the growth of the asset class.
When does the comment period close?
The SEC release states that comments are due 60 days after the proposing release is published in the Federal Register. Secondary summaries have offered specific calendar dates: one law-firm note cited December 7, 2026 under a file number of S7-2026-35, while the SEC’s own linked documents carry the identifier ia-7023. Because outlets differ on the exact deadline and file reference, readers should rely on the Federal Register notice or SEC.gov for the authoritative date rather than any single secondary summary. Comments are submitted through the SEC’s rulemaking portal and become part of the public record the Commission must consider before adopting any final rule.
What happens next?
As a proposal, the rules do not take effect now. The Commission will collect comments, may revise the text, and would need a further vote to adopt a final rule, a process that can run many months. The proposal arrives as U.S. agencies move on digital assets while federal market-structure legislation remains stalled, and it sits alongside a separate, broader SEC crypto-asset rulemaking that is also out for public comment. Observers have also noted practical constraints on the agency’s pace, including leadership and quorum questions that have affected rulemaking timelines across 2026. This article reports the regulatory facts of the proposal and is not investment advice.
Sources
SEC.gov — SEC Proposal Would Address How Investment Advisers and Funds Can Custody Crypto Assets (Press Release 2026-100)
Latham & Watkins — SEC Proposes Changes to Adviser Custody Rules, Including New Cryptoasset Custody Framework
Reuters/Yahoo Finance — SEC proposes crypto custody rules for investment advisers, funds
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David Okafor is STnews's DeFi & Web3 Lead, covering Layer-2 scaling, rollups, MEV, account abstraction and smart-contract security. His work follows STnews's editorial standards: primary-sourced, cited, and non-advisory.
Conflicts of interest
I do not invest in early-stage tokens. Long-term holdings disclosed at the bottom of each article.
