The SEC proposed rules on Oct. 1 that would give regulated funds, including mutual funds, a clear path to hold crypto assets and let advisers offer clients crypto strategies that custody uncertainty has kept off the table.
“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 S. Atkins said in the announcement. The proposal, he said, gives advisers and funds “a compliant pathway where none existed before.”
The proposal amends custody rules written for traditional assets under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Registered investment companies and business development companies would be covered, and the SEC said the changes would expand investor choice by removing barriers that inhibit advisers from providing crypto-related investment advice.
For fund investors, the practical change is that a regulated fund could maintain crypto in self-custody through its investment adviser, provided the adviser meets the proposal’s self-custody requirements and the fund’s board oversees the arrangement. The proposal also allows state trust companies to serve as custodians, subject to conditions including state authorization, safeguarding procedures, audited financial statements and segregated client holdings.
Self-custody is a narrow carve-out, not a default. An adviser would have to establish that no permitted custodian is available for each asset and reassess that quarterly, with transfers of a self-custodied asset requiring approval from at least two authorized individuals. The SEC’s rules also contemplate safeguards around private keys, cybersecurity and keeping each client’s holdings separate.
The gap this proposal aims to close is long standing. Advisers must keep client assets with qualified custodians, but it has been unclear which crypto arrangements meet that bar, leaving many firms hesitant to offer digital-asset strategies at all. The Digital Chamber told the SEC in a May 2025 submission that some advisers had declined token allocations or asked portfolio companies to hold their tokens until custody became available.
It is a proposal, not a final rule. A 60-day public comment period opens once the SEC publishes the release in the Federal Register, and the rules could still be revised before adoption.
SEC Commissioner Mark Uyeda noted that adviser custody creates “an inherent conflict of interest,” and that fiduciary duties would continue to apply when advisers hold clients’ crypto.
