The U.S. Securities and Exchange Commission has advanced a proposed rewrite of crypto custody requirements by sending the measure to the White House for review. The package was received by the Office of Management and Budget on Aug. 25, beginning an executive review process before the proposal is made public in full.

The planned amendments concern investment advisers and investment companies and are intended to update how client digital assets can be held under existing SEC custody rules. For now, the substance of the proposal remains limited to a high-level description, with the full text still unavailable.

A pre-release step in the rulemaking process

The OMB review places the proposal in a standard pre-release stage for federal rulemaking. According to the source article, the SEC will not publish the full details until that review is finished, the draft returns to the agency, and the commission moves toward a vote.

That means key elements of the custody overhaul, including the exact wording of the amendments and any compliance changes they may require, have not yet been disclosed. The proposal could also be revised before reaching the public comment stage.

Focus on digital asset custody

The SEC’s stated objective is to modernize custody requirements for crypto assets. In practical terms, the agency is seeking to clarify how digital assets may be held for clients while still fitting within custody rules that already apply under federal securities law.

The effort reflects a long-running mismatch between older regulatory frameworks and newer asset types. The article says the SEC is trying to answer questions about how digital assets should be held under rules that were written before crypto became part of regulated investment products.

Possible removal of outdated requirements

Alongside clarifying crypto custody, the SEC is also considering whether some existing custody requirements should be removed. The source article describes those provisions as potentially outdated because markets and asset-holding practices have changed over time.

At this stage, however, it is not clear which requirements may be targeted or how broadly the agency intends to reshape the current framework. Those specifics are expected to emerge only after the White House review and subsequent SEC steps.

Which laws the proposal would affect

The custody amendments would apply to rules under both the Investment Advisers Act of 1940 and the Investment Company Act of 1940. That gives the proposal a potentially broad footprint across the parts of the investment industry that handle client assets and regulated funds.

The article also notes that this custody initiative could proceed separately from ongoing market-structure legislation. In other words, the SEC’s work on how crypto assets are held does not necessarily depend on the timeline of broader legislative debates around digital-asset market rules.

What comes next

The next confirmed step is completion of the OMB review. After that, the proposal would return to the SEC, where it could be revised, put to a commission vote, and then released for public comment.

Until those stages occur, the rule remains a proposal under review rather than a final policy. The clearest unanswered issue is what specific changes the SEC wants to make to the custody regime for digital assets and which existing requirements it may decide to keep, revise, or remove.

Source: crypto.news