On 1 October 2026, the Securities and Exchange Commission (SEC) proposed new rules and amendments under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 for the custody of crypto assets by registered investment advisers, registered investment companies and business development companies.
The immediate change is that the SEC is no longer trying to fit crypto solely into custody rules designed around conventional securities and traditional custodians. The proposal follows the Commission’s 2023 safeguarding proposal, which had highlighted the difficulty of applying the qualified-custodian model to crypto assets traded or held through platforms that did not fit the existing framework. The 2026 proposal creates explicit crypto-specific routes instead of treating that earlier framework as the endpoint.
The proposal would permit advisers and regulated funds to hold crypto assets in self-custody in specified circumstances and would allow state trust companies to serve as permitted custodians, subject to due-diligence and safeguarding conditions. It would also modernise related requirements covering financial-statement audits, broker-dealer custody, recordkeeping and disclosures.
The scope is narrower than a blanket crypto-custody regime. Under the proposed framework, the Advisers Act custody provisions would apply only where the relevant crypto asset is a fund or security, while the Investment Company Act provisions would apply to crypto assets that are securities or similar investments.
FMI WORLD analysis: Custody is one of the control points that determines whether a digital asset can enter a regulated investment workflow. It links legal ownership with segregation, key management, transfer authority, asset recovery, account statements, audit evidence and the operational controls used when something goes wrong.
The proposal therefore changes more than the list of institutions allowed to hold crypto. Allowing adviser or fund self-custody would move some safeguarding responsibility inside the investment organisation itself. Allowing state trust companies to act as custodians could broaden the provider pool, but only if advisers and fund boards can establish that those firms are properly authorised and maintain effective controls against theft, loss, misuse and misappropriation.
For institutional crypto markets, that could reduce one source of regulatory uncertainty while increasing the importance of governance, cyber resilience, insolvency treatment, reconciliation and auditability. The operating test will be whether these new custody routes can preserve investor protections while supporting the transfer and settlement mechanics of digital assets.
This is still proposed rulemaking. It does not make every crypto asset eligible for self-custody, approve every state trust company, or establish that a particular custody model is compliant before the final rules and conditions are settled.
The proposal directly affects registered investment advisers, registered investment companies, business development companies and their boards. It also matters to banks, broker-dealers, state trust companies, specialist crypto custodians, auditors, compliance teams, wallet and key-management providers, administrators and institutional investors whose operating models depend on a legally robust custody chain.
For service providers, the competitive question is likely to shift from whether they can technically safeguard digital assets to whether they can satisfy the authorisation, segregation, cyber, audit and reporting standards that advisers and regulated funds will need to evidence.
Watch Federal Register publication, which will start the 60-day comment period, and then the detailed conditions attached to adviser or fund self-custody. The state trust-company provisions will be especially important: the proposal requires advisers and regulated funds to establish, and revisit annually, a reasonable basis for believing that the trust company is authorised to provide crypto custody and maintains appropriate safeguarding policies and procedures.
Also watch the treatment of broker-dealer custody, financial-statement audits, account statements, recordkeeping, disclosures and operational controls, together with comments from asset managers, fund boards, banks, trust companies, specialist custodians and auditors. The decisive next step is whether the final rule preserves the proposal’s broader custody routes and how tightly those routes are conditioned.
Sources — SEC press release, 1 October 2026; SEC proposing release IA-7023 / IC-36353; SEC 2023 safeguarding proposal.
FMI WORLD NEWSROOM story reference: FMIWT-20261002-003.