SEC proposes framework allowing investment advisers, funds to self-custody crypto

The U.S. Securities and Exchange Commission on Thursday proposed a new regulatory framework for the custody of crypto assets by investment advisers and regulated funds. The framework aims to provide a "compliant pathway" for holding digital assets under rules that largely predate the internet.

"Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure," SEC Chairman Paul Atkins said in a release. "Unfortunately, our rules and regulations have not kept pace."

The proposal would address a key gap for institutional investors, where qualified custodial infrastructure for some crypto assets may not yet exist. It would also permit crypto assets to be held in self-custody under certain circumstances and allow state trust companies to serve as custodians for client and regulated fund crypto assets. This is important for asset managers, hedge funds, and others who want to hold bitcoin and other crypto assets directly rather than through an ETF or another intermediary.

The proposal would also allow advisers to "self-custody" client and regulated fund crypto assets under limited circumstances, including when the adviser determines that no permitted custodian is available. SEC Commissioner Hester Peirce clarified that the term refers to advisers acting as custodians for client assets, rather than investors directly controlling their own crypto.

"True self-custody is not the right choice for everyone, but many crypto owners prize being able to custody their own assets," Peirce said in a statement. "Regulators should zealously protect investors' right to self-custody and not attempt to force investors to custody their assets with someone else. But I digress."

The public comment period will remain open for 60 days.

"More regulatory proposals are on the horizon, and I look forward to continuing to help President Trump cement the United States as the crypto capital of the world," Atkins said.

The announcement comes as both the SEC and Commodity Futures Trading Commission have accelerated efforts to establish crypto regulations after the Clarity Act failed to pass the Senate. In the days that followed, the SEC released its long-awaited innovation exemption while the CFTC filed crypto asset rulemaking with White House.

"Moving quickly & aggressively," NovaDius President Nate Geraci wrote Thursday in a post on X. "Some politicians are going to wish they passed the Clarity Act."