SEC Proposes Rules That Could Change How Funds Custody Crypto

Regulatory efforts continue following the CLARITY Act’s failure to advance. The US Securities and Exchange Commission has now proposed new rules to create a clearer framework for the custody of crypto assets by registered investment advisers and regulated funds.

The SEC said the changes would address how such assets are held under federal securities laws.

Addressing Crypto Custody Uncertainty

The proposal essentially aims to remove some regulatory barriers that currently affect advisers providing crypto-related investment advice. Under it, digital assets could be held through state trust companies in certain circumstances. The rules would also allow crypto assets to be held through self-custody arrangements under specific conditions.

The SEC said the proposal gives regulated funds more options for offering investment strategies linked to crypto assets. It also updates certain requirements related to financial statement audits for registered investment advisers and broker-dealer custodial services for regulated funds.

SEC Chairman Paul S. Atkins explained that existing custody rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 were designed for traditional assets and largely predate the internet. He added that these rules do not adequately address the custody needs of newer crypto assets. Atkins further pointed out that custodial services for crypto assets can take months to become available after an asset is launched, which ends up creating challenges for investment advisers and regulated funds.

The SEC’s proposal, therefore, aims to address this gap through a framework while modernizing existing requirements to reflect current industry practices and support crypto innovation in the US. While highlighting that the latest move is not an “isolated initiative,” Atkins went on to add,

“It is another element of a comprehensive crypto asset regulatory approach. It began with ending regulation by enforcement. In December 2025, Commission staff issued a no-action letter to the Depository Trust Company regarding DTC’s voluntary securities tokenization pilot program. And in January 2026, Commission staff issued a statement on tokenized securities that provided a clear tokenization taxonomy for the marketplace.”

The proposed changes are not final. The SEC is seeking public comments on the proposal before making a final decision. The public comment period will remain open for 60 days.

Regulatory Focus Shifts

The CLARITY Act’s failure to advance has shifted attention toward what US regulators can do without waiting for Congress. Coinbase co-founder Brian Armstrong previously argued that the SEC and CFTC already have enough authority to establish clearer rules for crypto, and that the industry cannot afford to wait for legislation.

Similar views were shared by Bitwise CIO Matt Hougan as well, who said that these developments do not replace the CLARITY Act or settle every outstanding regulatory question, but they show how the agencies could help shape crypto rules through their existing authority while broader legislation remains stalled.