Overview
- The SEC filed the proposing release (File/Release No. S7-2026-35) to create a tailored custody framework for registered investment advisers and regulated funds on Oct. 1, 2026.
- Under the proposal, state-chartered trust companies that meet defined authorization, financial reporting, and segregation requirements could qualify as permitted custodians for client and fund crypto.
- The rule would allow an adviser or a fund acting through its adviser to self-custody client crypto only when no qualified custodian is available and after meeting ongoing controls such as dual authorization for transfers, quarterly reassessments, cybersecurity measures, and client disclosures.
- The proposal also tightens audit, reporting, recordkeeping, and broker-dealer custodial rules to make holdings verifiable and to reduce risks tied to private keys and operational failures.
- The change formalizes prior staff guidance and a Sept. 30, 2025 no-action letter, begins formal rulemaking with a public comment period that can reshape the final text, and could broaden institutional access to crypto while raising questions about state trust oversight and adviser conflicts of interest.