The US Securities and Exchange Commission (SEC) has proposed easing the rules that govern how investment advisers and funds hold crypto assets, potentially clearing a regulatory hurdle that has held some businesses back from offering clients digital asset investments.

Published on Thursday, the proposal would allow investment advisers to hold clients' crypto assets themselves — under conditions — when no eligible crypto custodian is available. It would also permit state trust companies to serve as crypto custodians.

"The crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace," SEC Chair Paul Atkins said in a statement.

The rule change targets a practical barrier to crypto investment: advisers often struggle to find a qualified custodian for a particular token, which limits the investments they can offer clients. The Digital Chamber has previously raised concerns about the lack of qualified crypto custodians. In a May 2025 submission to the SEC, the group said some advisers had declined token allocations or asked portfolio companies to retain them until custody became available.

In a statement on Thursday, SEC Commissioner Hester Peirce likened the uncertainty to a regulatory "roller coaster," saying advisers have been "gritting their teeth and holding on for dear life" while awaiting workable custody rules.

Self-custody would come with safeguards

Advisers seeking to hold clients' crypto directly would have to establish that no permitted custodian is available for each asset and reassess that determination quarterly. If a custodian becomes available, the assets would need to be transferred as soon as reasonably practicable.

Self-custody would also require safeguards around private keys, cybersecurity, and the separation of each client's holdings, and at least two authorized individuals would have to approve any transfer of a self-custodied crypto asset.

SEC Commissioner Mark Uyeda said in a statement that the proposal recognized that adviser custody creates "an inherent conflict of interest," and that advisers' fiduciary duties would continue to apply when they hold clients' crypto.

The proposal would also allow regulated funds to keep crypto assets in self-custody with their investment adviser, provided the adviser meets the self-custody requirements and the fund's board oversees the arrangement.

State trust company option

Using a state trust company — a financial firm authorized by a US state to look after assets on other people's behalf — would carry separate conditions. These include ensuring the firm is authorized by the relevant state authority to provide crypto custody, maintains reasonable procedures to safeguard crypto assets from loss, theft, or misappropriation, and produces audited financial statements and internal control reports, as well as segregating client holdings from the company's own assets.

The package proposes changes to audit, recordkeeping and disclosure requirements. The SEC will accept public comments for 60 days after the proposal is published in the Federal Register, and the custody options it describes would take effect only if the agency reviews that feedback and votes to adopt a final rule.

The latest proposal adds to a push by the SEC and the Commodity Futures Trading Commission to set clearer rules for crypto under their existing powers after the CLARITY Act failed to advance in the Senate last month. The CFTC has submitted a crypto-market regulation proposal for White House review, while the SEC has opened a path for trading tokenized stocks. For advisers and funds tracking the shift toward clearer crypto rules, the near-term markers are procedural: the close of the 60-day comment window, the outcome of the CFTC proposal's White House review, and any subsequent SEC vote to finalize the custody changes.

Source: Cointelegraph