SEC submits crypto custody overhaul proposal

TLDR

The SEC has sent a major proposal to the White House to overhaul how investment advisers and funds custody crypto, signaling a move toward clearer and potentially lighter rules for institutions.

1. The proposal, Amendments to the Custody Rules, is now under White House review and is classified as economically significant and deregulatory.
2. The overhaul targets how registered advisers and investment companies hold client crypto, aiming to remove outdated burdens while preserving investor protection.
3. Nothing changes yet for users or firms, but a formal proposal and public comment period are expected next, which will define the real impact.

Deep Dive

1. What The SEC Has Done So Far

The SEC has sent a draft rule, titled Amendments to the Custody Rules, to the White House Office of Management and Budget (OIRA/OMB) for review as of August 25, 2026. Reports note that the filing is marked economically significant and categorized as deregulatory under Executive Order 14192, suggesting an intent to loosen rather than tighten custody obligations for crypto assets held by investment advisers. This step follows the agencys withdrawal of its stricter 2023 Safeguarding Rule and the shift toward a more rulemaking-focused, crypto friendly posture under Chair Paul Atkins, as covered by recent market analysis.

Confidence: high, given multiple aligned regulatory and media sources.

2. How The Overhaul Could Change Crypto Custody

The proposal would update custody rules under the Investment Advisers Act and Investment Company Act, specifically to clarify how advisers and funds can hold crypto for clients while staying within SEC requirements. The SEC has said the rulemaking is meant to clarify the framework for the custody of crypto assets and modernize provisions that no longer fit current trading and holding practices, including digital wallets and private key management, as summarized by The Blocks coverage. If the final rule allows more flexible qualified custodians or technologies like multi signature and MPC wallets, it could lower operational and legal friction for registered funds holding assets such as Bitcoin or Ether for clients.

3. What To Watch Next In The Rule Process

The rule text is not yet public. OMB can request changes before sending it back to the SEC, which would then vote on whether to publish a formal proposal and open at least a 60 day comment window, as noted by Crypto Briefing. Key things to watch are:

1. The publication of the actual proposal, which will define which assets, custodians, and wallet structures are permitted.
2. Industry comments from large advisers, custodians, and crypto firms, which may shape revisions.
3. How this rule interacts with broader initiatives like Regulation Crypto Assets and the stalled CLARITY Act, which together will define the larger U.S. market structure.

Conclusion

The SECs crypto custody overhaul is a procedural step, not a finished rule, but it strongly signals a move toward clearer and potentially lighter requirements for institutional crypto custody. For now, day to day holding of crypto by advisers and funds remains under existing rules, yet the coming proposal and comment process could become a major catalyst for how deeply traditional investment products integrate digital assets in the United States.