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SEC moves to clear custody hurdle for advisers offering crypto
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The US Securities and Exchange Commission has proposed relaxing digital-asset custody rules so advisers may hold clients’ crypto when no qualified custodian is available. Published Thursday, the proposal would also let state trust companies act as custodians. It targets a barrier that has limited some advisers’ ability to offer particular tokens. Chair Paul Atkins said rules have not kept pace with crypto’s growth into a multi-trillion-dollar asset class.
Demand for crypto exposure has outpaced the infrastructure for safeguarding it. Advisers can struggle to find a custodian for a token, prompting them to decline allocations or ask portfolio companies to retain assets. The Digital Chamber told the SEC in May 2025 that shortages had delayed exposure. The proposal seeks wider access without relaxing advisers’ fiduciary duties.
Under the draft, advisers must establish for each asset that no permitted custodian is available. They would reassess that finding quarterly and transfer holdings as soon as reasonably practicable if a custodian appeared. Controls would cover private keys, cybersecurity and client separation. Two authorized people would approve every transfer, while regulated funds could use compliant adviser self-custody under board oversight.
Commissioner Mark Uyeda said adviser custody creates an inherent conflict of interest because the firm would advise clients and safeguard their assets. Fiduciary duties would still apply, but the controls are intended to make self-custody workable. The framework is a limited exception, not blanket permission to control client tokens. It could make niche or newly issued assets more available through advisers.
A separate provision would authorize state trust companies to provide crypto custody under state oversight. Firms would need relevant authorization, reasonable protection against loss, theft or misappropriation, and audited statements and internal-control reports. Client holdings must be segregated from corporate property. The SEC also proposed changes to audit, recordkeeping and disclosure requirements.
Industry reaction reflected frustration with the current patchwork. Commissioner Hester Peirce called adviser uncertainty a regulatory “roller coaster,” saying firms had been “gritting their teeth and holding on for dear life” awaiting workable rules. The Digital Chamber’s submission cited declined or delayed token allocations. The SEC will accept comments for 60 days after Federal Register publication.
Final adoption is not assured; the SEC must review comments and revise the framework. The move follows CFTC efforts to clarify crypto rules after the CLARITY Act stalled in the Senate. It also advances the SEC’s policy path for tokenized stocks.
