While markets wait for the Fed, one of the quieter US crypto rulemakings has a date on it. On 1 October the Securities and Exchange Commission proposed a “tailored framework” for how registered investment advisers and regulated funds hold crypto assets, and the proposal was published in the Federal Register on 6 October (SEC press release 2026-100; Federal Register, 91 FR 63870). Public comments are due on 7 December 2026, according to the Federal Register notice. SEC Chairman Paul Atkins said the proposal would give a clear framework for crypto custody and replace the uncertainty created by outdated custody rules (SEC).
Informational only. This is not legal, tax or investment advice, and a proposal is not a rule.
What the SEC is proposing
The proposal rewrites the custody rules that govern advisers under the Investment Advisers Act of 1940 and funds under the Investment Company Act of 1940. According to the law-firm summary by A&O Shearman, the Advisers Act custody rule would be redesignated Rule 223-1, and two new Investment Company Act rules, 17f-8 and 17f-9, would cover fund custody of crypto assets. The SEC’s stated aims are to modernise custody rules, expand investor choice, remove barriers to advisers giving crypto-related advice and let regulated funds, meaning registered investment companies and business development companies, offer a wider range of crypto strategies.
The four changes that matter most
1. Limited self-custody for advisers. An adviser could hold a client’s crypto itself only when no qualified custodian will hold the asset, and cost is not an allowed reason. The adviser must record that finding in writing before taking custody and at least quarterly, and must move the asset to a custodian as soon as reasonably practicable once one becomes available (A&O Shearman). Conditions listed in the Federal Register notice include documented expertise in safeguarding each asset, private-key management with joint authorisation by at least two people, segregation of each client’s assets by crypto address, annual review of cybersecurity controls, an internal-control report within six months of taking custody and annually after, and at least quarterly account statements. A&O Shearman adds that a SOC 1 Type 2 report would qualify for the control report and a Type 1 would not.
2. State trust companies as qualified custodians. Advisers and funds could use a state trust company if they have a reasonable basis, after due inquiry and annually afterwards, to believe it is authorised by its state banking authority to provide crypto custody and has written safeguarding policies. They must also review its audited financial statements and internal-control report, and client assets must be segregated from the company’s own (Federal Register; A&O Shearman). The proposal would replace a September 2025 staff no-action position, and A&O Shearman notes that the proposed text drops that letter’s ban on lending, pledging or rehypothecating client assets, a gap on which the SEC asks for comment.
3. More broker-dealers as fund custodians. For registered funds, eligible custodians would widen from exchange members to all registered broker-dealers that comply with Exchange Act Rule 15c3-3 or a comparable rule (A&O Shearman).
4. Fund governance and audit changes. For funds, the board would have to review the adviser’s “no custodian available” determination before custody begins and quarterly afterwards, and make a reasonable-care determination before custody and annually (Federal Register). The proposal would also remove the requirement that the accountants who perform the control reports be registered with the PCAOB (A&O Shearman).
Video: a 2 October 2026 explainer from the FXContext channel. Third-party commentary, not our analysis.
What it does not do, and what is unclear
Three limits are worth stating plainly. First, it is a proposal: nothing changes until the SEC adopts a final rule, and the comment period runs to December. Second, scope. A&O Shearman reads the proposal as covering, for non-fund advisory clients, only crypto that is itself a “fund” or a “security”, so digital commodities such as bitcoin and ether appear to fall outside the adviser custody rule, while for regulated funds the broader “securities or similar investments” test appears to reach them. The reasoning for that split is not explained in the summary, and A&O Shearman is a law-firm summary, not the proposing release; read the primary document before relying on it. Third, no transition period is proposed, although the SEC asks whether one is needed, especially for advisers that already hold key materials.
There is also a date discrepancy. The Federal Register notice says comments should be received on or before 7 December; A&O Shearman gives 5 December. Sixty days from 6 October is Saturday 5 December, so the later Monday date is consistent with a weekend roll-forward. We use 7 December, which is the Federal Register’s date, and recommend anyone filing a comment confirm the deadline on the official site.
| Date | Event | Source |
|---|---|---|
| 1 Oct 2026 | SEC announces the proposal (press release 2026-100) | SEC |
| 6 Oct 2026 | Published in the Federal Register (91 FR 63870) | Federal Register |
| 20 Oct 2026 | Comment deadline for the SEC’s separate Regulation Crypto Assets proposal (passed) | Baker Botts, as cited in our 27 October report |
| 7 Dec 2026 | Comments due on the custody proposal (A&O Shearman lists 5 Dec) | Federal Register; A&O Shearman |
| 14 Dec 2026 | Comments due on the CFTC crypto-exchange notice | crypto.news, as cited in our 27 October report |
Why bitcoin holders should care
The direct effect is on professionals. An adviser who wants to buy bitcoin for clients today faces uncertainty about who may hold it; a mutual fund that wants direct exposure faces the same. The proposal is an attempt to answer both. It does not change how you hold your own coins, and, as far as the published summaries show, it does not by itself change how existing spot bitcoin exchange-traded products are held. Whether any particular fund falls within the Investment Company Act rules depends on its structure, and the fund’s prospectus is the place to check. Our guide on what you actually own when you buy a bitcoin ETF explains the custody chain behind such products, and our custodian checklist and self-custody withdrawal checklist cover the personal side.
Chart: bitcoin over one month, TradingView widget (live data). Bitcoin traded near $80,800 on Coinbase at 07:05 UTC on 28 October.
How it fits with the week’s other regulation
The custody proposal sits alongside the CFTC’s advance notice on a voluntary federal registration route for crypto exchanges, covered in our 27 October report, and the SEC’s Regulation Crypto Assets offering rules, whose comment period closed on 20 October. Taken together, regulators are building pieces of a framework through rulemaking while the Senate’s market-structure bill remains stalled after the 15 September cloture vote failed. Each piece has its own comment window, which makes the autumn an unusually busy period for anyone who wants to be heard.
Video: a 12 October 2026 news round-up that covers the custody proposal. Third-party commentary, not our analysis.
What to watch
- Comment letters from custodians, asset managers and bank trade groups before 7 December, which will show where the industry wants changes, especially on rehypothecation and the “no qualified custodian available” test.
- Any transition period the SEC adds, and whether the scope split between bitcoin-as-commodity and funds survives.
- The Senate calendar: a market-structure bill would interact with whatever the SEC finalises.
Method: bitcoin prices are Coinbase Exchange data pulled by Bitcoin Mastery at about 07:05 UTC on Wednesday 28 October 2026. Third-party figures are attributed to their source and date. Regulatory details come from the SEC press release 2026-100, the Federal Register notice 2026-20466 (unofficial web version, read in part) and an A&O Shearman summary; the latter is a law-firm summary and the proposing release itself was not read in full.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Bitcoin and other cryptocurrencies are volatile and you can lose some or all of the money you put in. Nothing here is a recommendation to buy, sell or hold bitcoin, any exchange-traded fund, any listed security or any other asset, and the technical levels, probabilities and scenarios discussed are descriptions of published data, not forecasts. Do your own research and consult a licensed financial advisor before making investment decisions.