SEC Proposes Tailored Custody Framework for Crypto Assets Held by Advisers and Funds

The US Securities and Exchange Commission (SEC) has put forward new rules and amendments designed to establish a dedicated framework governing how registered investment advisers and regulated funds, including registered investment companies and business development companies, may custody crypto assets under federal securities law. The proposal represents the regulator’s first structured attempt to adapt existing custody obligations, which were written for traditional securities, to the distinct technical and legal characteristics of digital assets.

For operators, the significance lies in what the proposal signals about direction rather than what it immediately requires. Custody has long been the practical bottleneck for institutional crypto exposure: qualified custodian definitions, segregation standards, and proof-of-reserve requirements have each been contested terrain. A tailored framework, if finalised, would give advisers and fund managers a clearer compliance path, potentially opening the door to broader allocations that have been constrained by regulatory ambiguity.

The proposal is now subject to public comment before any final rules take effect, meaning the current document is a starting point for industry engagement rather than binding obligation. Participants across custody infrastructure, fund administration, and advisory services will want to track whether the final rules align qualified custodian eligibility with existing crypto-native intermediaries or continue to favour traditional bank and broker-dealer structures.