The U.S. Securities and Exchange Commission has advanced its planned crypto custody rule to the White House review stage, sending the draft to the Office of Management and Budget on August 25. The project is aimed at investment advisers and registered investment companies that hold digital assets for clients.

The agency’s regulatory agenda currently points to October 2026 for a proposed rule, although that date is only a tentative target and not a legal deadline. For now, the existing custody framework remains in place while the contents of the draft stay out of public view.

A new attempt to update custody rules

The SEC has indicated that it wants to update custody requirements under both the Investment Advisers Act and the Investment Company Act to better address crypto assets. According to the agenda description, the goal is to modernize how the rules apply, ease burdens tied to outdated provisions, and clarify the custody treatment of digital assets.

That broad direction is public, but the text of the draft itself is not. As a result, key questions remain unanswered, including whether the proposal would address wallet standards, private-key handling, asset segregation, audits, or which entities could serve as eligible custodians.

How the current framework works

Investment advisers already operate under Rule 206(4)-2, which generally requires the use of qualified custodians for client funds or securities and relies on account statements and, in some cases, surprise examinations. But that rule does not extend to assets that are neither funds nor securities, leaving an important gap in how some crypto holdings are treated.

Registered investment companies are subject to a different custody structure under Section 17(f) of the Investment Company Act. The SEC’s current project is notable because it seeks to address adviser and fund custody issues together in a single rulemaking.

Why this matters for firms and clients

A clearer custody framework could affect how advisers and funds manage digital assets on behalf of clients by reducing uncertainty around compliance. It may also give firms more guidance when deciding where and how client crypto can be held.

How significant the impact would be depends on the final details. Areas likely to matter include the definition of an eligible custodian, the treatment of state-trust companies, standards for private-key controls, and rules around separating client assets. For individual investors, any changes are more likely to matter in adviser-managed or fund-based custody arrangements than in self-custody through personal wallets.

What happened before and what comes next

The SEC had previously pursued a broader custody initiative through its Safeguarding Advisory Client Assets proposal, which would have extended protections to all client assets, including crypto. That proposal was withdrawn in June 2025, meaning any renewed effort now has to move forward as a new proposal.

OMB review is a step that comes before public release. After that process, SEC staff can present the proposal to the commissioners. If the commission approves it, the rule would be published for public comment, typically for 30 to 60 days, before any revision process and eventual final rule. The only confirmed next step for now is completion of White House review; the October 2026 target for a formal proposal remains tentative.

Source: Coin Edition