SEC Drafts Crypto Holdings Rules for Advisers and Funds
SEC Proposes Rules to Clear Up How Advisers and Funds Can Hold Crypto
The U.S. Securities and Exchange Commission has proposed new rules aimed at clarifying how registered investment advisers and certain funds can custody crypto assets such as Bitcoin and other cryptocurrencies. The proposal is designed to replace years of uncertainty with a clearer compliance path for firms that want to hold crypto on behalf of clients.
At the center of the proposal is a framework that would permit self-custody under limited conditions and allow state trust companies to serve as qualified custodians. The SEC’s goal is to modernize custody expectations for crypto while maintaining controls intended to protect client assets.
The policy matters because registered investment advisers oversee more than $100 trillion in client assets, according to the information cited in coverage of the proposal. Even modest crypto allocations by advisers could meaningfully affect how regulated capital reaches crypto markets.
Under the SEC’s proposed custody approach, self-custody would be allowed only when no approved custodian exists for a given asset, and only if strict safeguards are met. Those conditions include dual authorization and audits, a structure that would likely make self-custody impractical for many advisers, pushing most firms toward third-party custodians.
Data referenced alongside the proposal highlights where regulated demand has been concentrated so far: U.S. spot Bitcoin ETFs hold $108 billion, compared with $17.8 billion for Ethereum ETFs, suggesting Bitcoin would likely be the first crypto asset to appear broadly in adviser accounts, with Ethereum potentially following given existing custody support for both.
The custody proposal sits within a broader SEC effort to update its crypto rulebook. The agency said it has also proposed a new package of rules titled “Regulation Crypto Assets”, intended to create a clearer, “fit-for-purpose” framework for certain investment contracts involving crypto assets. The SEC described the effort as building on its March 2026 interpretation clarifying how federal securities laws apply to certain crypto assets and related transactions.
The SEC also said its broader package includes a conditional safe harbor tied to the definition of “investment contract” under the Securities Act of 1933 and the Securities Exchange Act of 1934. If the proposed conditions are met, a crypto asset would be deemed not to be subject to an investment contract for purposes of those definitions. The SEC added that the proposal would preempt certain state securities law registration and qualification requirements.
Separately, the SEC has outlined a wider rulemaking agenda that Chair Paul Atkins previewed in July. That agenda includes initiatives related to the offer and sale of digital assets, potential amendments affecting crypto trading on national exchanges, and additional clarification on how broker-dealer rules apply to crypto, alongside efforts the agency described as aimed at reducing compliance burdens in other areas of securities regulation.
The SEC’s public comment period for the newly proposed rules will remain open for 60 days following publication of the proposing release in the Federal Register. Any changes would take effect only after the SEC finalizes the rules.
