The US Securities and Exchange Commission (SEC) unveiled the technical details of its new crypto custody framework on October 1, 2026. Proposed under two federal investment statutes, the framework aims to address legal uncertainty surrounding how financial advisers and investment funds custody client digital assets.
According to SEC Chair Paul Atkins, the proposed regulation directly responds to practical hurdles in the field. Current rules require investment managers to place assets with licensed custodians. This rigid requirement became problematic when new crypto assets emerged, as custody providers often take months to roll out post-launch token support.
Conditional Self-Custody Option
The regulator proposed a workaround through a conditional “self-custody” mechanism. Investment advisers may now directly hold their clients’ crypto assets if no qualified custodians are available in the market. This relief comes with accountability - managers must reevaluate the availability of third-party custody services on a quarterly basis.
SEC Commissioner Hester Peirce, widely known as Crypto Mom, clarified the context of the term for the public. Under the new rule, self-custody refers to investment advisers stepping in to hold assets for their clients, not retail investors storing crypto in their own hardware wallets without intermediaries.
Beyond self-custody, investment managers have the option to appoint state trust companies as custodians. Advisers must assess state authorization along with safeguard documentation prior to entering into an agreement, and subsequently repeat their review at least once a year.
Written safeguard documents must include protections against risks of theft, loss, misuse, and misappropriation of crypto assets and related cash. The proposal overhauls reporting and recordkeeping obligations for business entities, particularly registered investment companies and business development companies.
A Separate Path from the 2025 Draft
The regulator confirmed that release documents IA-7023 and IC-36353 stand on their own. This rule completely diverges from the previous safeguarding proposal draft that the SEC withdrew in June 2025.
The public comment period will remain open for 60 days following publication in the Federal Register. The final outcome of file number S7-2026-35 will ultimately determine the fate of institutional investment managers previously held back by outdated custody rules.
Reported by crypto.news.
Read also: US Banking Association Takes Regulators to Federal Court - Rejects Rule-Free Crypto Banking Licenses
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.
