SEC opens the door to crypto self-custody
The most significant change concerns the direct custody of assets.
This approach builds on the SEC’s regulatory shift on token sales.
Today, registered investment advisers that control their clients’ funds or securities generally have to use a “qualified custodian,” such as a bank or certain regulated brokers. That structure becomes more complicated with crypto, where some assets, protocols and features are simply not supported by these providers.
Paul Atkins had already outlined this direction on September 14: the SEC was expected to build a framework that answered “yes” to self-custody, but only in certain circumstances and with appropriate safeguards. He pointed in particular to the lack of a qualified third-party custodian for some digital assets.
The distinction matters. An adviser could not simply store private keys on a computer and consider the issue resolved. The proposal is aimed at a regulated framework with requirements covering the protection, governance, control and security of clients’ assets.
The SEC is therefore not so much seeking to eliminate custody as to recognize that, in some cases, technology that allows a manager to control the keys directly may constitute a custody solution in its own right.
For the institutional crypto industry, that would represent a major shift.
State trust companies also gain ground
The second change concerns state trust companies.
These trust companies, chartered at the state level, could take on a much clearer role as crypto custodians for advisers and funds.
The groundwork was laid in September 2025. At the time, SEC staff said it would not recommend enforcement action against certain advisers and funds that treated a state trust company as a bank authorized to custody digital assets, provided several safeguards were met.
Those safeguards included independent audits, oversight of cybersecurity procedures, segregation of client assets, a ban on lending or pledging crypto without authorization and regular reviews of the custodian.
The new proposal now seeks to establish this approach within a more durable regulatory framework.
Not everyone at the SEC views this opening in the same way, however. Commissioner Caroline Crenshaw had already warned in 2025 that some state trust companies are not subject to the same supervisory mechanisms as federally chartered banks, and that protections can vary significantly from one jurisdiction to another.
The debate is therefore less about the technical ability to custody crypto than about the level of safeguards required around the activity.
Hester Peirce had already criticized the SEC’s old rules as poorly suited to how digital assets operate. This reform now applies that logic directly to custody.
Funds could go much further into crypto
Custody is not an administrative detail.
If a fund cannot legally custody an asset or use a suitable custodian, it often cannot build the investment strategy that depends on it. Clarifying custody could therefore indirectly give regulated funds access to a broader range of crypto strategies.
The SEC says it wants to remove certain barriers preventing advisers from offering crypto-related advice and allow regulated funds to access a broader range of digital-asset strategies.
That could involve far more than passively holding Bitcoin or Ether.
Staking, tokenized assets, certain on-chain protocols and products requiring direct interaction with a blockchain become much more complicated when a fund must place the assets with a third party that does not support those features.
That is precisely the issue Paul Atkins highlighted: the current custody rules were written for a very different financial infrastructure. The SEC’s own regulatory roadmap describes the reform as a necessary modernization of rules that have become outdated as custody and trading practices have evolved.
The proposal is not yet in force, however.
The public will have 60 days after the text is published in the Federal Register to submit comments. The SEC could then amend the proposal before a potential final vote. Advisers and funds should therefore not treat the announcement as immediate authorization for self-custody.
The direction, however, is becoming clear.
After clarifying the legal treatment of several categories of digital assets in March and proposing a new regime for certain token sales in August, the SEC is now addressing a much more practical question: who can actually hold the crypto used by US institutions?
If the final framework retains the substance of this proposal, US institutional crypto will no longer necessarily depend on a handful of traditional custodians for every strategy.
And this time, the change is not only about how Wall Street buys Bitcoin. It directly affects how it can hold, manage and use on-chain assets.
