The US Securities and Exchange Commission (SEC) has proposed new rules to establish a clear framework for digital asset custody by registered investment advisers and regulated funds. The move follows the failure of the CLARITY Act to advance through Congress.
New Framework for State Trust Companies and Self-Custody
Under the proposed rules, digital assets could be held through state trust companies under specific circumstances, as well as through approved self-custody arrangements. The SEC stated that the framework aims to offer regulated funds more flexibility when delivering investment strategies tied to digital assets. In addition, the proposal updates financial statement audit requirements for registered investment advisers and broker-dealer custodial services for regulated funds.
SEC Chairman Paul S. Atkins stated that existing custody rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 were crafted for traditional assets and largely predate the internet. Atkins pointed out that custodial services for digital assets currently take months to become available after a token launches, creating friction for advisers and funds. These regulatory adjustments follow prior discussion around SEC crypto custody proposals affecting fund managers.
Broader Regulatory Approach and Industry Reaction
SEC Chairman Paul S. Atkins highlighted that the proposal is part of a comprehensive crypto asset regulatory strategy that began by "ending regulation by enforcement." He cited prior agency milestones, including a December 2025 no-action letter granted to the Depository Trust Company (DTC) for its voluntary securities tokenization pilot program, and a January 2026 staff statement providing a tokenization taxonomy for the market.
The public comment period for the SEC proposal will remain open for 60 days. Industry leaders have noted that agencies are utilizing existing authority as legislative efforts stall, echoing broader trends seen across US regulatory crypto actions. Coinbase co-founder Brian Armstrong previously stated that the SEC and CFTC possess sufficient power to establish clear rules, while Bitwise CIO Matt Hougan remarked that agency initiatives demonstrate how regulators can shape crypto rules through administrative authority.
Key Takeaways
- The SEC proposed new custody rules for registered investment advisers and regulated funds following the stalled CLARITY Act.
- Digital assets may be held via state trust companies or qualified self-custody arrangements.
- The proposal initiates a 60-day public comment period before final decisions are made.
- SEC actions follow a December 2025 DTC tokenization letter and a January 2026 tokenization statement.
Why It Matters
This regulatory proposal marks a shift from enforcement actions toward formal administrative rule-making for US financial institutions. By establishing clear regulatory pathways for state trust companies and self-custody, the SEC addresses institutional bottlenecks that have delayed product rollouts for months. How final rules balance security requirements with operational efficiency will significantly influence institutional crypto integration throughout 2026.
