SEC proposes tailored crypto custody framework for advisers and funds

TL;DR: The SEC proposed a tailored crypto custody framework for advisers and regulated funds. The changes are not final.

The SEC released a proposal on October 1 to update federal rules on how registered advisers and regulated funds safeguard digital assets. The agency aims to remove obstacles that prevent advisers from offering certain crypto strategies while maintaining investor protections. The proposal does not authorize all fund structures or decide which institutions qualify as custodians.

Operational focus

Investment managers face custody challenges beyond wallet technology: establishing control of assets, segregating client holdings, addressing lost or compromised keys, valuing positions, and meeting external oversight requirements. These tasks differ from holding conventional securities, even when both portfolios appear together in an investor’s interface.

Implications for distribution and costs

A well-aligned final regime could make crypto investments easier to distribute through existing fund and advisory channels. A mismatched custody requirement could increase costs or narrow the range of assets institutions support. The decisive factor for the industry is what the final rules require operationally, not treating the proposal as immediate permission.