The U.S. Securities and Exchange Commission released a proposed rule under Release No. S7-2026-35 aiming to modernize custody arrangements for crypto assets and crypto securities. The proposal targets registered investment advisers (RIAs) that hold client crypto and regulated investment companies that manage crypto securities, and it would permit qualified state-chartered trust companies to serve as permissible custodians if they meet defined conditions.
The move builds on a September 30, 2025 no-action letter that allowed certain state-chartered trust companies to be treated as qualified “bank” custodians under specific conditions. The SEC opened the proposal to public comment for 60 days after its Federal Register publication. The agency framed the change as addressing safekeeping, segregation and risk management that differ for crypto because control depends on possession of private keys, and it shifts focus from prior broker-dealer guidance tied to Rule 15c3-3 toward advisers and funds.
Detailed framework unveiled
The new items confirm the SEC’s proposal is a detailed framework under the Investment Advisers Act and Investment Company Act that would, under defined conditions, allow advisers and funds to use self-custody, permit state-chartered trust companies as custodians, and update audit and broker-dealer custody requirements. Chairman Paul Atkins said the change addresses rules that “have not kept pace.” A 60-day public comment period will open after Federal Register publication. The short second report simply restates the core allowance for self-custody.