The U.S. Securities and Exchange Commission has advanced a proposed overhaul of its crypto custody rules to White House regulatory review, a step that could reshape how investment advisers and registered funds hold digital assets.

SEC Advances Crypto Custody Rule Changes

The SEC submitted its proposed custody rule changes to the Office of Management and Budget on August 25. The Office of Information and Regulatory Affairs, within the OMB, is now reviewing the proposal. OMB review is a standard step for significant rulemakings under federal administrative procedure before an agency finalizes a proposal for public release.

The agency said investment advisers have raised questions about how to hold crypto assets while meeting existing custody requirements. The proposed changes therefore seek to clarify how firms can safeguard digital assets for clients. Custody has long been a friction point for institutional crypto adoption: under the SEC's Customer Protection Rule for broker-dealers, firms must hold client assets in control accounts with qualified custodians, and the question of which entities can serve that role for digital assets has been contested for years.

The overhaul would apply to investment advisers and investment companies under existing federal securities rules. It would also remove certain requirements that regulators consider outdated amid changing market practices.

However, the SEC has not released the proposal's complete text. Specific changes involving qualified custodians and custody arrangements remain unclear until publication.

Proposal Follows Broader SEC Crypto Shift

The custody initiative forms part of a wider regulatory shift under SEC Chair Paul Atkins. The commission has pursued clearer rules for digital assets while revisiting several policies developed under the previous administration.

In March, the SEC and the Commodity Futures Trading Commission issued joint guidance clarifying how securities laws apply to digital assets. The SEC has also provided guidance indicating that some memecoins may not qualify as securities.

The agency has also introduced Regulation Crypto Assets, a proposed framework designed to create a tailored regime for digital asset offerings, and it continues developing proposals covering broker-dealers and crypto market structure.

The SEC withdrew its earlier safeguarding proposal in June 2025 following concerns from industry participants. That proposal would have expanded custody requirements to cover more client assets, including cryptocurrencies. Under the new approach, regulators are restarting custody rulemaking through a separate proposal, which could provide a different framework for institutions seeking compliant crypto custody.

White House Review Sets Next Regulatory Steps

The OMB review represents a key procedural stage before the SEC can formally consider releasing the proposal. After the review, the document could return to commissioners for a vote. If approved, the SEC would publish the proposal and open a public comment period, which would typically give industry participants at least 60 days to respond.

Investment advisers, funds, custodians, and crypto companies could then assess the proposed requirements. Public feedback could also prompt SEC staff to modify provisions before developing a final rule.

The proposal arrives as Congress continues debating broader U.S. crypto market structure legislation. Custody requirements, however, fall within the SEC's existing regulatory authority, allowing this rulemaking to advance separately.

For institutional crypto markets, the potential removal of outdated requirements could expand custody options. Even so, the proposal remains subject to regulatory review, commission approval, and public feedback. Its final impact will depend on provisions that remain unpublished and could change before adoption. Until then, the initiative signals continued movement toward a more defined U.S. crypto custody framework.