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SEC Proposes Easing Crypto Custody Rules for Investment Advisers

Regulatory move could remove barrier that has limited adviser offerings of digital assets

By LineZotpaper
Published
Read Time2 min
The US Securities and Exchange Commission has proposed easing rules governing how investment advisers and funds hold cryptocurrency, potentially clearing a regulatory hurdle that has prevented some firms from offering digital asset investments to clients.

The proposal, published by the SEC on October 2, 2026, addresses custody requirements that have kept some investment advisers from offering certain crypto products. Under current federal rules, advisers must meet specific custody standards designed for traditional securities, which have proved difficult to apply to digital assets held on blockchains or with third-party custodians.

The SEC's move aims to remove that obstacle by relaxing how advisers and funds can custody crypto assets, though the precise details of the rule changes have yet to be fully outlined. The proposal is now open for public comment, a standard step before any final rule. Industry participants have long argued that the existing custody framework created uncertainty and compliance costs, limiting their ability to respond to client demand for crypto exposure.

The regulator's action represents the latest effort to fit digital assets into the existing securities regulatory framework. It follows years of enforcement actions and guidance from the SEC warning that custody practices for crypto must comply with federal law. The proposal suggests a shift toward providing clearer pathways for advisers to engage with the asset class.

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Analysis

Why This Matters

  • Investment advisers have been reluctant to offer crypto due to unclear custody rules; this proposal could open the door to broader client access
  • The SEC signals a more accommodating stance on digital assets, potentially accelerating institutional adoption of crypto
  • Public comments will shape the final rule, making the next few months critical for market participants

Background

The SEC has historically taken a strict approach to crypto custody, arguing that the protections of the Investment Advisers Act extend to digital assets. Custody requirements under the Act are designed to prevent adviser fraud and ensure client assets are safeguarded. Applying those rules to crypto, which lacks the same custodial infrastructure as traditional securities, has created a regulatory impasse that this proposal seeks to resolve.

Key Perspectives

Investment advisers: The new rules could reduce compliance burdens and legal risk, allowing them to meet client demand for crypto investments without fear of regulatory action. Industry advocates: They have long pushed for tailored custody rules, arguing that the one-size-fits-all securities framework was never designed for digital assets. Critics: Some investor protection advocates may warn that relaxing custody standards could increase the risk of loss or theft, particularly if assets are held on unregulated platforms.

What to Watch

  • The SEC's comment period for the proposal and any industry feedback
  • The final rule text and its effective date
  • Whether other regulators, such as state authorities, adjust their own custody requirements in response

Sources

Zotpaper

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