SEC Proposes Conditional Self-Custody for Advisers and Funds

The Securities and Exchange Commission proposed rules on Thursday that would let registered investment advisers and regulated funds hold crypto assets themselves, but only where no permitted custodian is available for the asset. The same proposal would let state-chartered trust companies act as custodians for client and fund holdings. It redesignates the Advisers Act custody rule and adds two rules under the Investment Company Act of 1940. Comments run for 60 days once the text appears in the Federal Register. Nothing binds anyone yet.

Three rule numbers, and one that only the filing carries

The proposing release is numbered IA-7023 and IC-36353, filed as S7-2026-35, and touches parts 270, 274, 275 and 279 of title 17 of the federal regulations. Rule 206(4)-2 under the Investment Advisers Act of 1940, the custody rule advisers have worked under for years, is redesignated as rule 223-1 and amended. Two new rules sit under the Investment Company Act: 17f-9 covers a fund holding crypto assets itself, and 17f-8 covers custody by a state trust company. Securities.io names 223-1 and 17f-9 and attaches no number to the trust company route. None of the secondary accounts read here names 17f-8. That number comes from the filing.

What an adviser has to do to hold the keys

Self-custody is not opened up generally. An adviser taking it on would carry a set of standing obligations, drawn from the proposing release and Securities.io's reading of it:

a written determination, made before custody begins and reviewed quarterly, that no permitted custodian is available for the asset
documented expertise and systems for safeguarding each asset held
joint authorisation by at least two people for access to private keys
client assets in separate crypto addresses, with an annual review of cybersecurity controls
an accountant's report on internal controls within six months and annually after that
quarterly statements to clients showing the addresses held and the transactions in them

A fund's board would review the arrangement quarterly. Cointelegraph, writing on Friday, adds that once a permitted custodian becomes available the adviser has to move the assets to it, which only one account carries. The trust company route has its own tests: state banking authorisation, audited financial statements, internal control reports, and client assets segregated from the firm's own.

The release leaves several things unsaid

No account read here gives a vote count, and the commission's own announcement does not state one. CoinDesk, publishing at 4:20 p.m. Eastern, calls the proposal a 760-page rule. Nobody else gives a page count. Commissioner Hester Peirce is quoted in two places and never the same way. The Block has her saying that regulators should zealously protect the right of investors to self-custody. Cointelegraph has her describing advisers gritting their teeth and holding on for dear life while they waited for workable rules. Neither outlet carries the other's sentence, and the underlying statement document was not read directly here. CoinDesk alone reports that Peirce, who led the agency's crypto task force, leaves on 4 October.

"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. Unfortunately, our rules and regulations have not kept pace," said Paul S. Atkins, the commission's chairman.

One word doing two jobs

Self-custody here means the adviser holding client assets, not an individual holding their own, a distinction The Block draws explicitly. Elsewhere the term points the other way: Brazil now requires reports on self-custody transfers above $10,000, and there the keys belong to the customer. Cointribune alone reports that the proposal takes over from a no-action letter issued on 30 September 2025, which carried no legal force.

The clock is the one thing with no date on it. Comments close 60 days after Federal Register publication, and that date is not set. The filing follows a transfer agent overhaul and the exemption granted to tokenized stock venues. What advisers will watch in the comment file is narrower: whether the test of no permitted custodian being available survives contact with an asset that has one custodian, or a poor one.