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- SEC sent its planned crypto custody rule to OMB for White House review on August 25.
- The SEC agenda targets October 2026 for a proposal, but no legal deadline applies.
- Current adviser custody rules cover client funds and securities, not every digital asset.
The U.S. Securities and Exchange Commission has moved a planned crypto custody overhaul into White House review. The SEC sent the draft to the Office of Management and Budget on August 25. The proposal targets investment advisers and investment companies that handle digital assets for clients. Wu Blockchain also drew attention to the filing in a recent X post, citing Bloomberg’s report.
Notably, the move does not change current law or custody requirements today. OMB’s Office of Information and Regulatory Affairs must review the draft before the SEC can publish it. The SEC regulatory agenda lists an October 2026 target for a proposed rule. That timetable carries no legal deadline.
What the SEC Could Change in Crypto Custody
The SEC says the planned amendments will modernize custody rules under the Investment Advisers Act and Investment Company Act. Its regulatory agenda specifically includes crypto assets. The agency says advisers and investment companies have raised questions about holding crypto while meeting current custody requirements. It also plans to remove burdens from provisions it considers outdated.
The public still cannot see the draft rule’s detailed requirements. The SEC has not disclosed which provisions it wants to remove or rewrite. It has not announced new standards for wallets, private keys, segregation, audits, or eligible custodians.
Current adviser rules already set a baseline for some client assets. Rule 206(4)-2 generally requires qualified custodians when registered advisers hold client funds or securities. The rule also uses account statements and, in some cases, surprise examinations. SEC guidance says the rule does not cover assets that are neither funds nor securities.
The new draft also differs from the SEC’s 2023 Safeguarding Advisory Client Assets proposal. That earlier plan would have expanded adviser safeguards to all client assets, including crypto. The SEC formally withdrew it in June 2025 and said future action would require a new proposal. Therefore, the old terms do not describe today’s draft.
Registered investment companies follow separate custody requirements under Section 17(f) of the Investment Company Act. Those rules govern how funds maintain securities and other investments with permitted custodians. The new SEC project covers adviser and fund rules, so the agency can address both frameworks in one rulemaking.
Advisers and Funds Could Gain Clearer Options
Even so,the project follows SEC actions that already changed parts of the crypto custody landscape. In September 2025, staff issued no-action relief for certain state-chartered trust companies. Registered advisers and regulated funds may treat qualifying state trust companies as banks for covered crypto custody arrangements. Firms must meet several conditions before relying on that relief.
The conditions require due diligence before a firm hires a state trust company and another review each year. Firms must assess whether the company can legally provide crypto custody. They also need grounds to believe the custodian uses controls against theft, loss, misuse, and misappropriation. Those controls must address private-key management and cybersecurity.
A broader SEC rule could reduce reliance on staff letters and separate interpretations. The agency says firms have asked how they can hold crypto while meeting existing requirements. Clearer rules could reduce compliance uncertainty around managed <a href="https://xpertsstudio.com/bitcoin-roars-back-above-71000-as-crypto-markets-rally/” title=”Bitcoin roars back above $71,000 as crypto markets rally”>Bitcoin and other digital assets. The result will depend on requirements that the SEC has not published.
Investor Protection Questions Will Shape the Debate
Removing older requirements does not automatically remove core safeguards for client assets. The current adviser rule uses qualified custodians, account statements, and examinations to deter misuse. The SEC’s state-trust relief also requires firms to review private-key controls and cybersecurity. Those measures show areas regulators already examine when institutions hold crypto.
The SEC spent 2025 asking how traditional custody rules fit blockchain systems. Commissioner Hester Peirce requested input on hot storage, cold storage, wallet controls, and fund custody. The questions also covered how storage rules affect an adviser’s ability to execute strategies. The agency has not said which answers shaped the current draft.
Industry groups have offered different approaches. The Blockchain Association supported more flexibility, including possible adviser self-custody under safeguards in some situations. SIFMA urged regulators to preserve protections around rehypothecation and lending while adapting rules to blockchain systems. Other financial groups warned against expanding eligible custodians without comparable capital, oversight, and operational standards.
For individual investors, the direct effect will depend on how they access crypto. The SEC project focuses on assets that advisers and investment companies hold under regulated custody arrangements. It does not describe new rules for people who control their own Bitcoin wallets. Changes could instead reach investors through funds, advisers, and managed accounts.
What Happens Before Any New Rule Takes Effect
Meanwhile, OMB review comes before the SEC publicly releases the proposal. OIRA can discuss changes with the agency or return a draft for more work. After that review, SEC staff can present the proposal to commissioners. The Commission must approve a proposed rule before the agency starts the formal public process.
The SEC’s agenda currently targets October 2026 for a notice of proposed rulemaking. That date represents an estimate rather than a fixed deadline. If commissioners approve the proposal, the SEC would publish the text and invite public comments. The agency says proposed rules typically receive comment periods of 30 to 60 days.
The SEC could revise the proposal after reviewing comments from investors, advisers, funds, custodians, banks, and other parties. Commissioners would need another vote before any final rule could take effect. A final release would identify compliance dates and transition periods. Until then, the existing custody framework continues to govern covered firms.
Investors and firms will watch the public text for qualified-custodian eligibility, state trust companies, private-key controls, and account segregation. They will also watch hot storage, cold storage, native crypto assets, and tokenized securities. Those provisions will show whether the proposal lowers operating barriers while preserving defined protections for client assets.
The proposal could affect how quickly advisers expand managed crypto exposure across markets. Industry submissions say current uncertainty can limit custody choices and product access. SEC staff relief has already expanded some custody routes without rewriting the full rulebook.
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Source: coinedition.com