Securities and Exchange Commission (SEC) Chairman Paul Atkins announced a new proposal on October 1, 2026, designed to modernize digital asset custody rules for registered investment advisers and regulated funds. The proposal formally acknowledges that federal securities regulations have failed to keep pace with Bitcoin and the broader crypto market since its launch in 2008.
Modernizing the Custody Framework
The SEC proposal amends both the Investment Advisers Act and the Investment Company Act to establish explicit custody standards for crypto assets. Under the proposed framework, registered investment advisers and funds, including mutual funds, would gain a clear legal pathway to hold digital assets. Atkins noted that existing standards "have not kept pace" with the asset class's transition from a niche experiment to a multi-trillion-dollar market.
The proposed framework introduces several key structural provisions:
- Self-custody permissions: Advisers can allow clients to maintain self-custody of crypto assets under designated parameters.
- Expanded qualified custodians: State-chartered trust companies would qualify as custodians alongside traditional banks and broker-dealers.
- 60-day comment window: The public comment period will remain open for 60 days once the rule appears in the Federal Register.
According to Atkins, the initiative replaces outdated guidance created for a bygone era, giving advisers and funds a compliant pathway "where none existed before."
Legislative Context and Enforcement Policy
The SEC's regulatory action follows broader legislative delays in Washington. The proposal arrives weeks after lawmakers failed to advance the CLARITY Act, which stalled in the Senate on September 15. With Bitwise identifying sectors impacted by the CLARITY Act failure, the SEC has turned to administrative rulemaking to address market standards.
This shift is part of a broader agenda under Atkins aimed at ending regulation-by-enforcement tactics and establishing clearer frameworks for tokenization and digital asset integration within US financial markets.
Why It Matters
For years, institutional participation in Bitcoin and digital assets was constrained by vague custody rules that limited institutional exposure. By recognizing state-chartered trust companies and defining conditions for self-custody, the SEC is eliminating major legal ambiguities for fund managers. If adopted, these rules could provide the regulatory certainty required for mainstream wealth management platforms to integrate digital assets directly into client portfolios.
