The US Securities and Exchange Commission has proposed changes that could make it easier for investment advisers and regulated funds to offer clients exposure to digital assets, addressing a custody problem that has limited access to some tokens.
Under the proposal, advisers could hold clients’ crypto assets themselves when no eligible crypto custodian is available, provided they meet a series of safeguards. The SEC would also permit state trust companies to act as crypto custodians under separate requirements. The proposal is not yet final: the regulator will accept public comments for 60 days after the measure is published in the Federal Register.
The issue is important because investment advisers generally need to ensure that client assets are held with an eligible custodian. In crypto markets, advisers may not be able to find a qualified custodian for a particular token. That can prevent them from offering the asset, or lead them to ask clients or portfolio companies to retain it until custody arrangements are available.
According to Cointelegraph, the SEC’s proposal is intended to address that practical barrier while preserving controls around asset protection, conflicts of interest and fiduciary responsibilities.
Conditions for adviser self-custody
An adviser would not receive unrestricted permission to hold client crypto. It would first have to establish that no permitted custodian is available for the specific asset. That conclusion would need to be reassessed every quarter.
If an eligible custodian later became available, the adviser would be required to transfer the assets as soon as reasonably practicable. This condition is designed to make self-custody an alternative used when necessary, rather than the default arrangement.
Advisers holding assets themselves would also need protections covering private keys, cybersecurity and the separation of each client’s holdings. Private keys control access to crypto assets, so losing or compromising them can affect the ability to transfer or recover those assets. The proposal would require at least two authorized individuals to approve any transfer involving a self-custodied crypto asset.
The same framework could apply to regulated funds that hold crypto with their investment adviser. In that case, the adviser would have to satisfy the self-custody requirements, while the fund’s board would oversee the arrangement.
SEC Commissioner Mark Uyeda said adviser custody creates an inherent conflict of interest. The proposal therefore maintains the relevance of advisers’ fiduciary duties when they hold client crypto assets themselves. Those duties require advisers to continue acting within their responsibilities to clients, although the source material does not specify how any particular conflict would be resolved.
State trust companies could become custodians
A second part of the package would allow state trust companies to provide crypto custody. These are financial firms authorized by individual US states to look after assets on behalf of other people.
The companies would need authorization from the relevant state authority to provide crypto custody. They would also need reasonable procedures to protect digital assets against loss, theft or misappropriation. In addition, they would be required to have audited financial statements and internal control reports.
Client assets would have to remain separate from the trust company’s own property. Segregation is intended to distinguish customer holdings from the custodian’s assets and support clearer ownership records.
The SEC proposal also includes changes involving audits, recordkeeping and disclosures. Together, the measures would affect both how crypto is held and the information advisers and custodians must maintain or provide.
Part of a wider US crypto rulemaking effort
SEC Chair Paul Atkins said the crypto market had grown from a niche market into a multi-trillion-dollar asset class, while regulations had not kept pace. Commissioner Hester Peirce described the uncertainty around custody rules as a regulatory “roller coaster” for advisers waiting for workable requirements.
The Digital Chamber had previously highlighted the shortage of qualified crypto custodians. In a submission to the SEC in May 2025, it said some advisers had declined token allocations or asked portfolio companies to hold the assets until custody became available.
The latest proposal follows efforts by the SEC and the Commodity Futures Trading Commission to develop clearer crypto rules using their existing authorities. The source material says the CLARITY Act failed to advance in the Senate last month. It also says the CFTC has sent a crypto-market proposal to the White House for review, while the SEC has opened a path for trading tokenized stocks.
Moneyiar market picture
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