The U.S. Securities and Exchange Commission on Oct. 1 formally announced a new proposal on crypto asset custody, laying out a dedicated regulatory framework for registered investment advisers and regulated funds. The agency said the plan is meant to replace outdated rules, create a clearer compliance route for advisers that provide crypto-related advice, and widen the range of financial products available to investors.
Built on amendments to two 1940 laws
The proposal is tied to the latest amendments under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. The SEC said it is setting tailored regulatory standards for investment advisers and regulated funds, including registered investment companies and business development companies.
SEC Chair Atkins said that since Bitcoin launched in 2008, crypto assets have grown into a multi-trillion-dollar asset class. He added that many traditional custody rules were written before the internet became widely used and do not offer the flexibility needed for digital assets. The new plan, he said, is intended to update financial statement audit mechanisms and broker-dealer custody requirements, while giving the market a more predictable compliance path than the one available under the earlier regulatory setup.
Self-custody would be allowed in specific cases
The headline change in the proposal is a break from a single centralized custody model. Under the new framework, registered investment advisers and funds would be allowed to use self-custody for digital assets under specific conditions.
The proposal also explicitly includes state trust companies within the definition of qualified custodians, allowing them to hold crypto assets for clients and funds.
ABMedia said this structural change lowers the operating threshold for institutional entities entering the crypto asset market and gives asset managers a broader set of custody options for digital asset risk control.
Regulated funds could offer broader crypto strategies
The SEC said the new rules would reshape investment flexibility for regulated funds, allowing asset managers to bring a wider range of crypto asset strategies to market and expand the mix between traditional finance and decentralized assets. The affected fund categories include registered investment companies and business development companies.
The proposal has now entered the formal rulemaking process. Once the notice is published in the Federal Register, a 60-day public comment period will begin. After feedback is collected and revisions are made, the commission will hold a final vote to determine the implementation timeline and the details of the final version of the crypto custody framework.
Key points from the proposal
- The SEC is proposing a new framework under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 to replace older rules and remove compliance barriers for advisers offering crypto asset advice.
- The proposal would allow self-custody under specific conditions and would recognize state trust companies as qualified crypto custodians.
- Regulated funds, including registered investment companies and business development companies, would be able to pursue a broader range of crypto asset investment strategies.
- After publication in the Federal Register, the proposal will be open for public comment for 60 days before a final commission vote.