HedgeCo.Net — The U.S. Securities and Exchange Commission on October 1, 2026 proposed a regulatory framework for the custody of crypto assets by investment advisers and regulated funds under the Investment Advisers Act and Investment Company Act. Chairman Paul Atkins said in an official statement that existing custody rules largely predate the internet and leave advisers and funds without a clear compliant pathway for an asset class clients increasingly demand. The Block reported that the proposal would allow self-custody in limited circumstances and permit state trust companies to serve as custodians.
A core problem the Commission cited is timing: for newly developed crypto assets, qualified custodial capabilities may lag an asset’s deployment by many months. The proposal aims to close that gap while also modernizing older adviser and fund custody provisions that have not been amended for decades. Commissioner Hester Peirce, in a separate statement, clarified that “self-custody” in the adviser context means the adviser acting as custodian for client assets, not retail investors holding their own keys, and emphasized protecting investors’ right to true self-custody where appropriate.
The public comment period is expected to run for 60 days after Federal Register publication; nothing in the package is final. Atkins linked the proposal to a broader Commission crypto agenda that has included tokenization guidance, a Regulation Crypto Assets proposal, and an Innovation Exemption. The Block noted the timing follows the Senate’s failure to pass the Clarity Act and parallel CFTC crypto rulemaking activity.
For hedge funds, RIAs, and crypto-native managers, the practical signal is that the SEC is trying to move custody from enforcement ambiguity into a notice-and-comment rule. Comment letters are likely to focus on when adviser self-custody is permitted, cybersecurity and key-control standards, and how state trust companies fit alongside traditional qualified custodians.
A core problem the Commission cited is timing: for newly developed crypto assets, qualified custodial capabilities may lag an asset’s deployment by many months. The proposal aims to close that gap while also modernizing older adviser and fund custody provisions that have not been amended for decades. Commissioner Hester Peirce, in a separate statement, clarified that “self-custody” in the adviser context means the adviser acting as custodian for client assets, not retail investors holding their own keys, and emphasized protecting investors’ right to true self-custody where appropriate.
The public comment period is expected to run for 60 days after Federal Register publication; nothing in the package is final. Atkins linked the proposal to a broader Commission crypto agenda that has included tokenization guidance, a Regulation Crypto Assets proposal, and an Innovation Exemption. The Block noted the timing follows the Senate’s failure to pass the Clarity Act and parallel CFTC crypto rulemaking activity.
For hedge funds, RIAs, and crypto-native managers, the practical signal is that the SEC is trying to move custody from enforcement ambiguity into a notice-and-comment rule. Comment letters are likely to focus on when adviser self-custody is permitted, cybersecurity and key-control standards, and how state trust companies fit alongside traditional qualified custodians.
More alternative-investment intelligence like this
Daily briefings, AI news summaries, and the full research platform on 372,600+ decision-makers & 118,200+ firms — start your free 7-day trial, card required, cancel anytime.