The US Securities and Exchange Commission has proposed easing rules governing how investment advisers and funds hold cryptocurrency, potentially removing a regulatory obstacle that has prevented some firms from offering clients digital asset investments.
Under the proposal published Thursday, investment advisers would be permitted to hold clients' crypto assets directly when no eligible crypto custodian is available for a particular token. The proposal would also allow state trust companies to serve as crypto custodians for the first time.
Addressing a Market Gap
The proposal targets a practical barrier facing the industry: investment advisers frequently struggle to find a qualified custodian for specific tokens, limiting the digital assets they can offer to clients. The Digital Chamber previously raised concerns about the lack of qualified crypto custodians, noting in a May 2025 submission to the SEC that some advisers had declined token allocations or requested portfolio companies retain assets until custody became available.
SEC Chair Paul Atkins stated in a statement that the crypto market has grown into a multi-trillion-dollar asset class while regulatory rules have not kept pace.
Safeguards for Self-Custody
Advisers seeking to hold clients' crypto themselves would face specific requirements. They must establish that no permitted custodian is available for each asset and reassess this determination quarterly. If a custodian later becomes available, assets must be transferred as soon as reasonably practicable.
Self-custody arrangements would require safeguards including controls around private keys, cybersecurity measures, and segregation of each client's holdings. At least two authorized individuals would be required to approve any transfer of a self-custodied crypto asset.
SEC Commissioner Mark Uyeda acknowledged that adviser custody creates an inherent conflict of interest, noting that advisers' fiduciary duties would continue to apply when holding clients' crypto.
State Trust Company Requirements
State trust companies serving as crypto custodians would need to meet separate conditions: authorization by the relevant state authority to provide crypto custody, reasonable procedures to safeguard assets from loss or theft, audited financial statements and internal control reports, and segregation of client holdings from the company's own assets.
The proposal also includes changes to audit, recordkeeping, and disclosure requirements. The SEC will accept public comments for 60 days after publication in the Federal Register.
