SEC proposes crypto custody framework for investment advisers and funds

The U.S. Securities and Exchange Commission has proposed an Oct. 1 crypto custody framework under two federal investment laws, allowing conditional self-custody and state trust company custody for investment advisers and regulated funds.

The proposal covers registered investment advisers, registered investment companies and business development companies. Advisers could hold crypto themselves when no permitted custodian is available, subject to conditions. State trust companies would face checks on their authority and safeguards before serving as custodians. Public comments will remain open for 60 days after publication in the Federal Register.

SEC Chairman Paul Atkins said in the statement shared in his Oct. 3 X post that the proposal addresses uncertainty over how advisers and funds can legally hold crypto assets for clients. The SEC published the same statement on Oct. 1, alongside its proposed rules.

According to the commission’s announcement, the framework would remove custody barriers that restrict crypto-related investment advice. The agency said it would also let regulated funds offer more crypto investment strategies, identifying registered investment companies and business development companies among the funds covered.

SEC crypto custody proposal would permit conditional self-custody

Under the SEC’s proposal, advisers could hold client and fund crypto assets themselves in limited circumstances. Commissioner Hester Peirce explained that an adviser must first determine that no permitted custodian is available for the asset, then repeat that assessment quarterly. In her Oct. 1 statement, Peirce said “self-custody” describes an adviser holding assets for clients. She distinguished the arrangement from investors keeping their own assets without an intermediary.

As crypto.news reported on Oct. 2, the conditional self-custody proposal forms part of a framework that also addresses outside custody providers. The SEC has opened the changes for comment rather than adopted them as final rules.

For state trust company custody, Peirce said advisers and funds must assess the company’s state authorization and written safeguards before appointing it, then repeat those checks annually. According to