SEC proposes adviser and fund crypto custody changes, with comments due 7 December

The US Securities and Exchange Commission has proposed a specific framework for the custody of crypto assets by registered investment advisers and regulated funds. Announced on 1 October and published in the Federal Register on 6 October, the plan would amend existing custody provisions under the Investment Advisers Act and Investment Company Act. The comment deadline listed in the SEC rule docket is 7 December 2026. It remains proposed rulemaking; it does not yet create new permissions available to every adviser or broker.[1][2]

A central distinction is between control of an asset and accountability for protecting clients' property. Traditional securities custody typically involves a regulated intermediary, account records and established controls around asset segregation and verification. Crypto assets can introduce private-key control, network finality, smart-contract dependencies and third-party wallet infrastructure. The proposal seeks to adapt safeguarding requirements without assuming that all custody models are economically or operationally equivalent.[1]

According to the SEC, the amendments would allow registered advisers and regulated funds to self-custody crypto assets in certain defined circumstances, subject to conditions. They would also permit use of state trust companies for specified client or fund crypto assets, again subject to safeguards. Neither passage says that any wallet, technology provider or offshore entity would automatically qualify. Authorisation, legal responsibilities and the final rule text would determine which arrangements can be used.[1]

Rulemaking at a glance

The package also addresses broker-dealer custodial services for regulated funds and would modernise aspects of existing adviser custody requirements. Reporting, recordkeeping and audits form part of the broader architecture. A broker offering tokenised products or an adviser outsourcing wallet controls would have to establish which legal entity is holding the asset, who can authorise transfers, how independent checks operate and what happens when a custodian or technical supplier fails.[1]

For investors, custody is not the same as investment merit. Even if an asset is held under a compliant safeguarding arrangement, its price can fall, its market can become illiquid and an underlying smart contract can have vulnerabilities. Conversely, the availability of self-custody under a final regulated scheme would not remove the other duties of an investment adviser, including conflicts management and appropriate disclosure. These separate risks are often blurred in product marketing.[1]

The SEC docket lists 7 December 2026 as the deadline for written comments on S7-2026-35. The proposed changes contemplate circumstances in which an adviser or regulated fund could self-custody cryptoassets and allow certain state trust companies to serve as custodians, subject to safeguards. They do not already authorise any adviser to dispense with its existing custody duties. A client-facing intermediary must distinguish what the current rule requires from a policy option under consultation, especially when explaining who actually controls private keys or bears loss risk.[2]

The October SEC release and docket are clear on status: release IA-7023 and IC-36353, file S7-2026-35, with written comments due in December. Market participants can evaluate technical and commercial effects now, but deployment claims must wait for a final rule, any transition arrangements and the applicable permissions. The present news is the opening of a defined regulatory proposal, not a completed change to customers' custody rights.[1]

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