SEC sends crypto custody proposal for review

TLDR

The SEC has sent a proposed overhaul of crypto custody rules to the White House for review, a key step toward clearer rules for investment advisers holding digital assets.

1. The proposal, Amendments to the Custody Rules, reached the White House budget office on 25 Aug and is now under executive branch review before any public release.
2. Filing labels show it as economically significant and deregulatory, signaling a likely move toward more flexible custody options for institutional crypto exposure.
3. After review, the SEC can vote to publish the text for comment; outcomes will shape which custodians and wallet structures institutions can use for client crypto.

Deep Dive

1. What The SEC Filed

The SEC has advanced its proposed Amendments to the Custody Rules for crypto assets to the White House Office of Management and Budget (OMB), specifically its Office of Information and Regulatory Affairs, as of 25 Aug 2026. Reports describe this as a proposed overhaul of how investment advisers and funds hold client crypto under the Investment Advisers Act and Investment Company Act, with the stated goal of clarifying the custody framework and modernizing outdated provisions for digital assets. The proposal text is not yet public; OMB can request changes before sending it back to the SEC for a vote on publication for comment, as outlined in coverage of the filing and its OMB record.

Confidence: high because multiple regulatory-focused outlets and filings independently confirm the submission and its status.

2. How It May Change Custody

OMB has tagged the proposal as both economically significant and deregulatory, meaning it is expected to have at least a $100 million annual impact and is intended to ease, not tighten, existing custody requirements under Executive Order 14192. Current rules effectively force advisers to use traditional qualified custodians such as banks or broker?dealers, but few of these support crypto, limiting compliant exposure. Industry lobbying has pushed for modern standards that recognize multi?signature and multi?party computation wallets, and the SEC itself has said the rulemaking would clarify the framework for the custody of crypto assets and remove burdens from outdated provisions in its regulatory agenda and related summaries like Tokenposts overview.

3. What Comes Next

Procedurally, the next step is completion of OMB review, followed by an SEC commission vote on whether to release the proposal for public comment, typically for at least 60 days, before a final rule is drafted and adopted. The SEC aims to formally publish the proposal around October, aligning this with its broader shift under Chair Paul Atkins from enforcement-heavy tactics to rulemaking, and with parallel initiatives like Regulation Crypto Assets covered in recent reporting. This custody rule also runs alongside stalled congressional efforts such as the CLARITY Act, so the SEC is effectively pushing its own crypto framework while legislation is debated.

Conclusion

The SECs move to send its crypto custody overhaul to the White House marks a concrete step toward a clearer rulebook for how regulated investment advisers and funds can hold digital assets. Early indications that the measure is both economically significant and deregulatory suggest a potential easing of constraints that have kept many institutions on the sidelines. The real impact will depend on the final rule language, but for crypto users and projects seeking institutional capital, this process could materially reshape who can safely and legally custody client crypto in the United States.