Key Takeaways
- • The SEC submitted its crypto custody rule rewrite to the White House Office of Management and Budget (OMB) on August 25, 2026, marking a formal shift toward deregulation under Executive Order 14192, which mandates agencies eliminate ten existing rules for every new one enacted.
- • The proposed rule is classified as "economically significant" (indicating at least $100 million in annual economic impact) and sits explicitly in the deregulatory column, signaling the SEC intends to loosen—not tighten—custody requirements for crypto assets held by investment advisers and funds.
- • The rewrite targets a formal public proposal for October 2026, which will open a formal comment period; the current regime forces advisers to use "qualified custodians" (typically banks or broker-dealers), few of which accept crypto, leaving advisers with minimal compliant pathways to hold digital assets.
- • Industry players including Andreessen Horowitz, Delphi Ventures, and Multicoin Capital have shaped the framework; these firms submitted proposals requesting approval for multi-signature and multi-party computation (MPC) wallet structures as custody solutions.
- • The rule reverses course from former SEC Chair Gary Gensler's 2023 Safeguarding Rule, which sought to expand custody duties; the agency withdrew that stricter proposal in June 2025, clearing the path for modernization aligned with the current administration's deregulatory agenda.
Summary
The Securities and Exchange Commission has advanced a crypto custody rule overhaul to the White House for regulatory review, signaling a material easing of digital asset custody standards for institutional investors and their service providers. The proposal, formally titled "Amendments to the Custody Rules," reached the Office of Management and Budget on August 25, 2026, and carries two critical designations: it qualifies as economically significant (implying systemic financial impact exceeding $100 million annually) and is explicitly tagged as deregulatory under Executive Order 14192, signed by President Trump in January 2025.
The executive order framework is consequential for timeline and scope. It requires federal agencies to eliminate ten existing rules for every new regulation introduced. By filing the crypto custody proposal in the deregulatory column, the SEC has publicly committed to loosening rather than tightening requirements—a directional commitment evident before substantive rule text enters public view. The agency has targeted October 2026 for formal proposal publication, which will trigger an official comment period.
The current custody framework, originally adopted in 1962 and last substantially modified decades ago, mandates that investment advisers and investment companies custodize client assets through "qualified custodians"—predominantly banks and broker-dealers. Crypto's classification as a digital asset outside traditional custody infrastructure has left advisers in a compliance bind: few qualified custodians accept crypto holdings, forcing many to either avoid the asset class or operate in legal gray zones. The rewrite aims to resolve this structural mismatch by permitting alternative custody arrangements, particularly multi-signature and multi-party computation wallet architectures, according to frameworks submitted by venture capital firms Andreessen Horowitz, Delphi Ventures, and Multicoin Capital in late 2025.
This represents a sharp reversal from the prior regulatory trajectory. Former SEC Chair Gary Gensler initiated a 2023 Safeguarding Rule proposal designed to expand and strengthen custody obligations for digital assets. Agency staff simultaneously conducted enforcement reviews targeting advisers over crypto custody practices. The SEC withdrew the Safeguarding Rule in June 2025, removing the regulatory headwind and clearing institutional pathway for crypto asset adoption. The October formal proposal will reveal specific custody standards, eligible wallet technologies, and compliance mechanics—details currently withheld as the rule undergoes OMB interagency review.
The executive order framework is consequential for timeline and scope. It requires federal agencies to eliminate ten existing rules for every new regulation introduced. By filing the crypto custody proposal in the deregulatory column, the SEC has publicly committed to loosening rather than tightening requirements—a directional commitment evident before substantive rule text enters public view. The agency has targeted October 2026 for formal proposal publication, which will trigger an official comment period.
The current custody framework, originally adopted in 1962 and last substantially modified decades ago, mandates that investment advisers and investment companies custodize client assets through "qualified custodians"—predominantly banks and broker-dealers. Crypto's classification as a digital asset outside traditional custody infrastructure has left advisers in a compliance bind: few qualified custodians accept crypto holdings, forcing many to either avoid the asset class or operate in legal gray zones. The rewrite aims to resolve this structural mismatch by permitting alternative custody arrangements, particularly multi-signature and multi-party computation wallet architectures, according to frameworks submitted by venture capital firms Andreessen Horowitz, Delphi Ventures, and Multicoin Capital in late 2025.
This represents a sharp reversal from the prior regulatory trajectory. Former SEC Chair Gary Gensler initiated a 2023 Safeguarding Rule proposal designed to expand and strengthen custody obligations for digital assets. Agency staff simultaneously conducted enforcement reviews targeting advisers over crypto custody practices. The SEC withdrew the Safeguarding Rule in June 2025, removing the regulatory headwind and clearing institutional pathway for crypto asset adoption. The October formal proposal will reveal specific custody standards, eligible wallet technologies, and compliance mechanics—details currently withheld as the rule undergoes OMB interagency review.
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