SEC Crypto Custody Rules: Advisers May Hold Assets

The SEC proposed easing crypto custody rules, letting advisers hold client assets when no qualified custodian exists. Here's what it means for investors.

New SEC crypto custody rules may soon permit investment advisers to hold client crypto directly when no qualified custodian is available. Published Thursday, the proposal represents another step in the agency's effort to modernize regulation for digital assets. In addition, Robinhood's crypto chief Johann Kerbrat told The Block the company is still working through the SEC's latest innovation exemption on tokenized stocks.

What happened

The SEC unveiled a proposal on Thursday that would relax how investment advisers and funds handle crypto custody. Under current rules, advisers generally must use a qualified custodian. The new package would allow advisers to hold clients' crypto themselves if no eligible custodian is available for a specific asset.

Under the proposal, state trust companies would also be allowed to act as crypto custodians, if they satisfy certain conditions. Those include authorization from the relevant state authority, reasonable procedures to safeguard crypto assets, audited financial statements, internal control reports, and segregation of client holdings. Audit, recordkeeping and disclosure requirements are also addressed in the proposal.

Advisers who choose self-custody would face a set of protective requirements. For every asset, they would need to show that no permitted custodian can be used, and they would have to revisit that conclusion every quarter. Should a custodian later become available, the assets would have to be moved as soon as reasonably practicable. Self-custody would additionally call for protections covering private keys, cybersecurity, and the segregation of each client's holdings. Any transfer of a self-custodied crypto asset would require approval from at least two authorized individuals.

Regulated funds could keep crypto assets in self-custody with their investment adviser, provided the adviser satisfies the self-custody requirements and the fund's board provides oversight of the arrangement.

Why it matters

Custody has remained a stubborn obstacle for advisers seeking to offer crypto exposure. For some tokens, many have found it difficult to locate a qualified custodian, which has curtailed the investments they can bring to clients. The Digital Chamber has in the past called attention to the lack of qualified crypto custodians, and in a May 2025 submission to the SEC, it said some advisers had turned down token allocations or asked portfolio companies to keep them until custody became available.

SEC Chair Paul Atkins said the crypto asset market has become a multi-trillion-dollar asset class that investors want exposure to, yet rules and regulations have fallen behind. Commissioner Hester Peirce called the regulatory uncertainty advisers have endured a roller coaster, saying they have been holding on while waiting for workable custody rules. Commissioner Mark Uyeda recognized that adviser custody creates an inherent conflict of interest, and that advisers' fiduciary duties would still apply when they hold clients' crypto.

In practical terms, the proposal could widen the range of tokens advisers can offer and reduce reliance on a small pool of custodians. But it also shifts more operational risk onto advisers. Self-custody demands robust key management, cybersecurity and internal controls — areas where mistakes can be costly. The requirement for at least two authorized individuals to approve transfers adds a check, but it also introduces operational complexity.

Market reaction

No live market data was provided in the research notes for this article, so price reactions cannot be assessed. The proposal itself is a regulatory development, and its immediate impact on asset prices is not specified in the available information.

What to watch next

Once the proposal appears in the Federal Register, the SEC will take public comments for 60 days. The final rule will be shaped by that comment period. In the meantime, after the CLARITY Act stalled in the Senate last month, the SEC and CFTC are working to establish clearer crypto rules using their existing authorities. The CFTC has also sent a crypto-market proposal to the White House for review.

Robinhood's Kerbrat said the company is still working through the SEC's innovation exemption on tokenized stocks, for which the SEC has opened a path for trading. The way that exemption develops could shape broader tokenized asset adoption.

Key items to monitor:

Whether the proposal is published in the Federal Register, and when the 60-day comment window opens.
Feedback from advisers, custodians and industry groups on the self-custody conditions.
Any adjustments to the final rule that change the threshold for "no eligible custodian available."
Progress on tokenized stock trading and Robinhood's path through the innovation exemption.
Whether the CFTC's crypto-market proposal advances after White House review.

FAQ

What is the SEC's new crypto custody proposal?

The package would, under certain conditions, allow investment advisers to hold clients' crypto assets themselves when no qualified custodian is available. It would additionally let state trust companies serve as crypto custodians and allow regulated funds to self-custody alongside their adviser if specific requirements are satisfied.

Why did the SEC propose easing crypto custody rules?

According to the agency, the crypto market has grown into a multi-trillion-dollar asset class, but rules have not kept pace. Advisers have confronted uncertainty and a shortage of qualified custodians, which has limited the crypto investments they can offer clients.

How would self-custody work for investment advisers?

For each asset, advisers would have to verify that no permitted custodian is available and reassess that finding quarterly. They would need to protect private keys, maintain cybersecurity and segregate client holdings. Any transfer of a self-custodied asset would need approval from at least two authorized individuals, and once a custodian becomes available, the assets would move to it.