In brief

• The SEC proposed a tailored framework for how registered investment advisers and regulated funds can custody crypto, seeking to clarify which arrangements satisfy the "qualified custodian" standard that has long kept firms hesitant to offer digital-asset strategies.
• The plan would permit self-custody under certain conditions, allow state trust companies to serve as custodians, and update audit and broker-dealer custodial rules.
• It's the latest in the SEC's post-Clarity Act build-out, alongside the innovation exemption and Regulation Crypto Assets.

The Securities and Exchange Commission is moving to settle one of the thorniest questions in institutional crypto: how professional money managers are supposed to hold the assets.

The agency on Wednesday proposed a tailored framework governing how registered investment advisers and regulated funds can custody crypto, aiming to replace years of regulatory ambiguity with a clear compliance path.

Advisers are required to keep client assets with "qualified custodians" that meet strict safekeeping standards, but it has long been unclear which crypto arrangements satisfy that bar, leaving many firms hesitant to offer digital-asset strategies at all.

The proposal, issued under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, would ease that bottleneck in several ways. It would permit crypto assets to be held in self-custody under certain conditions, allow state trust companies to serve as custodians for client and fund crypto, and update rules around financial-statement audits for advisers and broker-dealer custodial services for funds.

The stated goal is to widen investor access to crypto strategies by removing barriers that have kept advisers on the sidelines.

"Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure," SEC Chairman Paul Atkins said in a statement, adding that the agency's rules "have not kept pace" and that the proposal would replace "the grey of uncertainty created by custody rules crafted for a bygone era."

The custody plan is the latest piece of a sweeping regulatory build-out the SEC has pursued since the Clarity Act stalled in the Senate.

The agency rolled out an "innovation exemption" letting tokenized stocks trade on-chain, proposed a crypto-fundraising framework dubbed Regulation Crypto Assets, and had staff clarify that token buybacks don't by themselves make a crypto asset a security.

Together, the moves reflect a broader shift in which crypto has stopped waiting on Congress and leaned into the regulators.

The proposal is not final. A 60-day public comment period will open once it's published in the Federal Register, after which the agency can revise the rules before any vote to adopt them.