SEC Unveils Custody Framework to Clarify Institutional Crypto Asset Storage Rules

The Securities and Exchange Commission has introduced regulatory proposals designed to resolve ambiguities around qualified custodians for cryptocurrency held by registered investment advisors and managed funds. The framework would permit self-custody of digital assets under specific circumstances and allow state-level trust companies to serve as qualified custodians, while also updating audit and intermediary custodial service requirements. SEC Chairman Paul Atkins emphasized that existing custody rules were designed for a previous era and that updated regulations aim to reduce compliance barriers and expand institutional investor access to digital asset strategies.

The SEC's proposal directly addresses a longstanding gap in institutional cryptocurrency participation. Investment advisors have faced uncertainty about whether they can safely store digital assets themselves or must rely on third-party custodians, creating friction for funds seeking crypto exposure. By permitting self-custody under defined parameters and recognizing state-chartered trust companies as eligible custodians, the framework removes barriers that have constrained institutional adoption.

The regulatory process remains preliminary. Before becoming binding rules, the proposal must undergo public review for 60 days, during which financial institutions and industry stakeholders can submit feedback. The SEC may then modify the framework before conducting a final vote, meaning material changes could still occur before implementation.