The US Securities and Exchange Commission (SEC) issued a proposed crypto custody regulatory framework on October 1, 2026, for registered investment advisers and mutual funds. The new rules are specifically designed to replace legacy provisions that never accommodated digital assets.
The move breaks an impasse for investment managers who had been constrained by conventional asset safekeeping rules.
Multi-Layered Requirements for Self-Custody
Under the new draft, the SEC permits self-custody practices by investment advisers under strict conditions. This approach is only legally viable if a qualified custodian is genuinely unavailable in the market for the digital asset in question. Investment managers must also demonstrate adequate expertise in managing digital assets, and their entire storage setup must undergo quarterly reviews.
Safekeeping options have also expanded to the regional level. State-chartered trust companies are now permitted to serve as qualified custodians for client crypto assets and mutual funds. Secondary provisions in the draft also update financial statement audit requirements for investment advisers, while refining broker-dealer custody service rules for mutual funds.
SEC Chair Paul Atkins stated that legacy rules have failed to keep pace with the evolution of the digital finance sector. He noted that the new proposal will eliminate the gray uncertainties of outdated regulations that held back institutional adoption. A public comment period will remain open for 60 days following the document’s publication in the Federal Register.
Filling the Void Left by the Senate
The draft custody regulations were released shortly after the CLARITY Act crypto bill failed to pass the Senate. The legislative effort stalled after securing only 49 votes in favor against 50 opposed, falling short of the 60-vote threshold needed to advance. This latest document rounds out the SEC’s independent crypto agenda, which previously saw the rollout of the Innovation Exemption for the securities tokenization sector and Regulation Crypto Assets for digital fundraising pathways.
The release of the rules marks a farewell within the commission. The custody proposal stands as the final initiative spearheaded by Commissioner Hester Peirce, known as “Crypto Mom,” before her official resignation on Friday, October 3.
Peirce’s departure reduces the SEC’s leadership to just two remaining commissioners. To prevent operational paralysis, the SEC has altered its decision-making quorum rules. Meetings are now considered legally valid with just two commissioners, down from the prior threshold of three, and a single commissioner can approve new rules independently if the other member has a conflict of interest.
Reported via CoinDesk.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
