The U.S. Securities and Exchange Commission’s proposed rules for crypto custody could expand the range of digital assets available through investment advisers, but the costs of compliance may make the option more practical for larger firms than smaller ones.
Approved on Oct. 1, the proposal would allow an adviser to hold certain client crypto assets when no qualified custodian is available to maintain them. The arrangement would come with requirements covering security, oversight, reporting and client disclosures.
According to CryptoSlate, the SEC’s economic analysis estimates certain annual costs at $433,833 for an adviser using this custody fallback. That figure is not a complete operating budget: it includes an independent control report and recurring compliance work, but excludes potentially significant technology, software, hardware and systems expenses.
What the SEC’s cost estimate covers
The largest component of the SEC’s modeled annual subtotal is an independent internal control report, estimated at $376,000. Recurring internal compliance work adds another $57,833, bringing the annual figure to $433,833 in 2026 dollars.
The analysis also lists an initial internal compliance cost of $173,499. The SEC’s estimate assumes 300 hours of initial work and 100 hours each year afterward, valued at $578.33 an hour. The work would cover information and communications requirements, as well as an agreement between the adviser and client treating the asset as a financial asset under applicable state law.
The estimate does not include all technology-related spending. The SEC expects technology, software, hardware and related processes to impose economically significant costs. Recordkeeping and disclosure obligations are also addressed separately in other parts of the analysis, meaning the $433,833 subtotal should not be read as the total cost of establishing and operating a crypto custody system.
The accountant estimate is based on an inflation-adjusted earlier estimate from the SEC’s Paperwork Reduction Act analysis and was rounded to the nearest $1,000. Actual expenses could differ depending on the assets involved, the safeguarding systems used and the expertise needed to review different blockchain networks.
For its burden calculation, the agency assumes that about 823 advisers—5% of the 16,442 registered advisers—would use the self-custody option. It also notes that actual participation could be lower.
Why firm size could matter
The SEC’s analysis says smaller advisers may decide not to offer the service because of the expense and operational demands. Larger firms may be better positioned to spread fixed costs across a wider client base, several assets or affiliated businesses.
That does not establish a specific minimum firm size for participation. A large adviser may have only a limited amount of covered crypto assets requiring the fallback, while a smaller firm focused on digital assets may already possess the necessary expertise and infrastructure.
Still, a fixed compliance burden generally weighs more heavily when it is allocated across a small pool of assets or clients. Advisers could absorb some expenses across their broader operations, or pass direct costs to clients through fees and other charges. More supported assets and networks could also require more complex controls and specialized accounting work.
The SEC cautions that demand for professionals capable of evaluating crypto controls could make independent services more difficult to obtain, particularly for smaller advisers with less negotiating power. In addition, the ability to afford compliance does not necessarily demonstrate that an adviser’s systems are effective at protecting client assets.
The fallback may apply only temporarily
An adviser could use the proposed arrangement only after conducting a reasonable inquiry and establishing a written basis for concluding that no qualified custodian would maintain a particular asset. The determination would have to be made before the adviser took custody and at least quarterly afterward.
An adviser could not rely on the fallback merely because its own arrangement was cheaper than using a custodian. If a qualified custodian later became available, the adviser would have to transfer the asset as soon as reasonably practicable. That change could occur between quarterly reviews, and the proposal does not set one universal transfer deadline for every case.
This creates a potential cost issue for firms that build systems for an asset and later have to move it to an eligible custodian. If no client crypto assets remained in adviser custody by the time a report was due, the report would not be required. However, the obligation would continue for other covered assets still held by the adviser.
Safeguards and current market picture
The proposal would require asset-specific safeguarding expertise, systems for managing cryptographic keys, authorization by at least two designated people and segregation of each client’s assets. Advisers would also face cybersecurity, reporting and disclosure requirements.
An independent control report would be due within six months of taking custody and at least once in each calendar year afterward. The report would examine the design, implementation and effectiveness of controls and include verification that records reconcile with the relevant crypto network. Quarterly client reporting would also apply, subject to stated alternatives and exceptions for qualifying audited pools and regulated funds.
The proposal would permit eligible state trust companies to provide custody, subject to initial and annual inquiries into their authorization and safeguards. National and state banks are also identified as permissible custodians in the related regulatory context. These alternatives could reduce the need for advisers to build their own systems, although an eligible custodian may not support every asset a client wants to hold.
Moneyiar market data at 09:39 on Oct. 3, 2026, showed mixed performance among the listed digital assets:
- Decimal (DEL) was priced at $0.4026702764, down 6.52% over 24 hours and 12.13% over seven days.
- RedStone (RED) was priced at $0.1682997367, down 3% over 24 hours and 0.66% over seven days.
- WINkLink (WIN) was priced at $0.0000466402, down 4.54% over 24 hours but up 8.25% over seven days.
The proposed framework could therefore widen access to some crypto assets through advisers, but its practical reach will depend on implementation costs, independent-accountant pricing and which assets qualified custodians ultimately support.
