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Points of Focus
- SEC sent a crypto custody rule proposal to the White House on Aug. 25.
- Only two companies have ever used the SEC’s prior special-purpose broker-dealer framework.
- Commissioner Peirce had publicly called the interim custody approach a gray zone.
The US Securities and Exchange Commission (SEC) sent a proposed overhaul of crypto custody rules for investment advisers and investment companies to the White House’s Office of Management and Budget (OMB) on Aug. 25, according to the agency’s own regulatory filing.
SEC Prepares Crypto Custody Rule Overhaul for Investment Advisers and Funds
According to Bloomberg, the SEC sent a new proposal to the White House Office of Management and Budget on Aug. 25 to clarify the custody framework for crypto assets held by investment advisers and… pic.twitter.com/Kepg1PfMni
— Wu Blockchain (@WuBlockchain) August 26, 2026
The rulemaking would improve and modernize custody regulations under the Investment Advisers Act and Investment Company Act, address crypto assets specifically, and remove provisions the SEC now considers outdated given how digital asset markets and trading practices have evolved.
Why the SEC’s prior crypto custody framework failed
The proposal caps 18 months of public pressure on a framework SEC Chair Paul Atkins has already conceded doesn’t work. Since 2020, companies seeking to custody crypto asset securities could apply for “special-purpose broker-dealer” status. In May 2025, Atkins said that framework needed to be repealed and replaced, noting only two companies had ever obtained the authorization, a result he attributed to significant limitations built into the original rules.
In the gap since then, the SEC leaned on staff guidance rather than formal rulemaking. A December 2025 Division of Trading and Markets statement said staff would not object to broker-dealers claiming physical possession of crypto asset securities without literally holding them, provided specific safeguards were in place.
A separate no-action letter permitted registered investment advisers to use state trust companies for custody. Commissioner Hester Peirce called that patchwork approach a regulatory gray zone that has harmed investors, language that echoed her own February 2025 request for industry input, titled “There Must Be Some Way Out of Here.”
How industry pressure shaped today’s custody rulemaking
The Blockchain Association responded directly in June 2025, telling Peirce’s Crypto Task Force that the existing custody rule “has impeded investor access to crypto assets because it is premised on an outdated custody model that pre-dates blockchain” technology entirely. That letter argued advisers should be able to maintain crypto assets under conditions substantially similar to those for crypto securities generally, without expanding the custody rule’s reach to non-security assets.
Today’s OMB filing is the SEC’s first attempt to turn 18 months of pressure, requests for information, comment letters, and staff-level workarounds into a binding rule rather than another interim statement.
What happens next for the SEC’s crypto custody rule
The proposal itself remains sealed until OMB completes its review.
If it moves forward, the SEC would hold a commission vote, publish the proposal, and open a public comment period of at least 60 days before drafting any final rule. That means the specific details — which crypto assets qualify, what custody arrangements satisfy the rule, and whether Atkins follows through on separately floated ideas like letting hedge funds self-custody — stay unknown for now.
This custody proposal moves on a separate track from Regulation Crypto Assets, the SEC’s other pending crypto rulemaking, whose Aug. 14 open meeting was postponed the same month this filing went to the OMB.
The two proposals address different parts of the same broader effort, and conflating them risks overstating how far either has actually progressed.
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