Melker Bengtsson
TL;DR
-
SEC proposes letting financial advisers custody any token under strict conditions; comments open for 60 days
-
Only allowed to self-custody if no custodian offers the token, rechecked every quarter
-
In 2023 Gensler's SEC proposed pretty much the exact opposite rule; it was withdrawn in June 2025
-
Main winners: state-chartered custodians like Coinbase Custody and Gemini Custody
A new custody framework, proposed by the SEC, would let financial advisers custody any token, under strict conditions. The proposal was presented yesterday and is now open for comments for a 60-day period.
What the new rules allow
Up until now, crypto custody for financial advisers has been stuck under a law written in the 1940s, the same rule that bonds and stocks follow. This clearly doesn't work for the blockchain. There are only a few federally recognized custodians for money managers and if none of them offered custody of a token it simply wasn't available to money managers. This proposal would change that.
SEC Chair Paul Atkins said in an October 1st statement:
Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace.
The new rules are for registered financial advisers and regulated funds, which include hedge funds and asset managers as well as ETFs and mutual funds. These together control most of US institutional money.
Money managers still have to do some work. If they use a state-licensed custodian, they have to make sure it's actually licensed, review its audits yearly and keep clients' coins separate from the custodian's own. They're only allowed to self-custody if there's no custodian that offers the token they want to invest in. This has to be rechecked every quarter.
It's important to note that this is adviser self-custody, not client self-custody. Hester Peirce, Republican SEC commissioner notes in a statement:
The proposal uses the term in a way that does not reflect true self-custody by investors. Rather, it focuses on advisers acting as custodians for their clients' assets and deems that situation to be 'self-custody.' I would have preferred the term 'shelf-custody' to distinguish adviser custody from situations in which investors custody their own assets without intermediation.
The proposal also only touches crypto assets that are "funds or securities" under the Advisers Act.
The opposite of Gensler's rule
Back in 2023, when Gary Gensler led the SEC, the agency proposed pretty much the exact opposite rule, the "Safeguarding Advisory Client Assets" rule. Gensler's SEC felt that crypto platforms could not be trusted to hold client funds at all. In a February 2023 statement, he said:
Make no mistake: Based upon how crypto platforms generally operate, investment advisers cannot rely on them as qualified custodians.
There was heavy opposition to this rule, both from Peirce and from the industry. The rule never made it past a proposal; it was formally withdrawn in June of 2025 under Atkins.
The main winners of this new proposal would be state-chartered custodians, such as Coinbase Custody Trust Company and Gemini Custody, which hold licenses in one or two states only, rather than a federal license.
Advisers would be able to offer crypto strategies to clients beyond the Bitcoin and ETH ETFs they're bound to by the current rules.
Since the CLARITY Act failed in the Senate, the SEC is moving fast with covering the vacuum its absence left. Regulation Crypto Assets, the Innovation Exemption and now custody. But it also shows how fast the rules can change with agency-only oversight. The Biden administration's SEC was proposing the opposite rule just a few years ago. And with a new administration, it could drastically change again.
