SEC Opens 60-Day Comment on Bitcoin (BTC) Custody Rule for Investment Advisers

A Custody Pathway Built for Advisers

The U.S. Securities and Exchange Commission on Thursday proposed a dedicated custody rule for digital assets, giving registered investment advisers and regulated funds a compliant path to hold client crypto under federal securities law for the first time. The draft is open for a 60-day public comment period and replaces custody provisions that were written decades before consumer internet access existed. According to the formal proposal published on the SEC newsroom, the text clarifies which types of firms may properly hold crypto assets, how advisers and regulated funds must keep records, and what federal disclosures and audit requirements would apply. Two provisions stand out. The draft would allow self-custody of crypto assets under certain circumstances, a notable shift for an agency that has long steered client assets toward third parties, and it would permit state-chartered trust companies to serve as custodians. SEC Chairman Paul Atkins framed the move as closing a gap left by rules crafted for traditional assets, arguing that requiring advisers to fit digital holdings into a framework built for stocks and bonds is untenable. The stakes are practical: advisers that today improvise with cold-storage setups or accounts at a crypto exchange would gain an explicit federal standard, and self-directed holders who manage their own crypto wallet arrangements would see a clearer boundary between permissible and non-permissible custody models. The proposal also touches auditing, an area that has produced years of friction between audit firms and digital asset businesses over how holdings are verified. Institutional flows remain a standing pillar of the bull market case for the Bitcoin price, which is why a defined custody pathway under the Investment Advisers Act and the Investment Company Act carries weight well beyond the SEC itself.

The timing is inseparable from personnel. The proposal lands one day before the departure of Commissioner Hester Peirce, who has led the agency's Crypto Task Force since its inception and leaves the SEC on Friday for a professorship in Virginia. Her exit leaves the commission with just two commissioners, a thinner bench for the eventual vote on any final rule. Atkins, in the statement accompanying the release, said the draft answers a recurring complaint from institutional investors: that qualified custody infrastructure simply does not yet exist for some crypto assets. He described the package as a modernization of the entire custody regime under both statutes, not a narrow patch, and argued the current rules were built to protect advisory clients and regulated funds from loss, theft, misuse and misappropriation while covering the safekeeping of traditional assets only. With custody now on the table, the agency has moved on every major item on the crypto agenda Atkins set out when he took office. Trading desks, market maker operations and registered funds that hold digital assets for clients have all been waiting on one definition: who may act as custodian. The 60-day window gives custodians, platforms and adviser trade groups their chance to push for changes before the commission drafts the final version.

A Proposal, Not Yet a Final Rule

The proposal also clarifies a point of practical interest: blockchain records would count toward compliance with the recordkeeping requirements, subject to conditions, according to the SEC's release. The self-custody allowance, meanwhile, is narrower than headline summaries might suggest. In his statement, Atkins said advisers and funds acting through their advisers could hold client crypto themselves only if no permitted custodian is available. The draft lands in a period of regulator-led motion on Capitol Hill's failure: lawmakers blocked the Clarity Act, the framework meant to classify digital assets as securities, commodities or payment stablecoins, in a procedural vote last month, and the SEC had already sent this custody proposal to the White House before that vote, saying it would proceed with rulemaking either way. Atkins has said he will continue working to make the U.S. the "crypto capital of the world" regardless of the legislation's fate.

The draft also sits inside a wider rulemaking push. The proposal extends tailored custody standards to regulated funds including registered investment companies and business development companies, and Chairman Paul Atkins tied the update to crypto's growth since Bitcoin's 2008 debut into a multi-trillion-dollar asset class that predates rules written before widespread internet use. The filing revises audit requirements for advisers' financial statements and broker-dealer custody provisions alongside the self-custody and state trust company provisions. According to the SEC's release, the 60-day comment clock starts only once the notice appears in the Federal Register, after which the commission can revise the text and schedule a final vote.

Commissioner Hester Peirce, in a statement on the filing, detailed conditions the draft attaches to both custody routes. Advisers relying on self-custody must determine that no permitted custodian is available for each asset, then reconfirm that judgment quarterly, and transfer holdings as soon as reasonably practicable if one emerges. Self-custody would also require safeguards over private keys, cybersecurity and segregation of each client's assets, with at least two authorized individuals approving any transfer. For state trust companies, advisers must reasonably conclude before use, and verify annually, that the firm holds crypto custody authorization from its state banking authority, with written procedures protecting crypto and related cash from theft or misuse. Peirce said the expanded custodian pool should spur competition among providers, while Commissioner Mark Uyeda cautioned that adviser custody carries an inherent conflict of interest, with fiduciary duties still applying.

The gap the draft addresses is well documented. The Digital Chamber told the SEC in a May 2025 filing that some advisers had refused token allocations outright, or required portfolio companies to retain their own assets, simply because no qualified custodian existed for those holdings. Commissioner Peirce described the resulting uncertainty as a roller coaster, saying advisers had been clenching their grip on the safety bar while waiting for a workable custody regime. The proposal arrives as state regulators have already moved on the segregation question: the New York Department of Financial Services issued guidance on September 30, 2025 requiring independent accounting and segregation of client crypto at licensed virtual currency businesses and limited-purpose trust companies. Beyond crypto, the filing would also revisit conditions for regulated funds using broker-dealers as custodians and exempt certain discretionary trading authority from Advisers Act custody rules.

(as of 21:26 UTC) COINOTAG's reading of the filing: this is a proposed rule, not a final one, and the distinction governs everything that follows. Once adopted, the framework would bind investment advisers and regulated funds under the Investment Advisers Act and the Investment Company Act, but with comments open for 60 days from October 1, no effective date exists yet, and the text can change. Even in draft form, however, a formal custody pathway removes the largest structural objection institutions have cited for keeping crypto allocations off the books.