SEC Sends Crypto Custody Rule Overhaul to White House in Push for Institutional Clarity
The US Securities and Exchange Commission has taken its most significant step yet toward rewriting the rulebook on how investment advisers and funds safeguard crypto assets, sending a proposed overhaul of its custody framework to the White House for review.
The proposed rule, formally titled “Amendments to the Custody Rules,” was submitted on Aug. 25 to the Office of Information and Regulatory Affairs, a branch of the White House Office of Management and Budget, according to the SEC’s regulatory agenda. The move sets up what could be the most consequential piece of crypto-related rulemaking since Paul Atkins took over as SEC chair.
What the proposal would do
At its core, the initiative targets the custody rules that govern how investment advisers and investment companies hold client assets. The SEC said it is considering amendments to existing rules under the Investment Advisers Act and the Investment Company Act, or possibly an entirely new rule, covering how firms hold client assets including crypto.
The stated goal is to clear up long-standing uncertainty about how companies can hold digital assets for clients while staying within federal securities rules. For nearly a decade, advisers navigating crypto have been forced to rely on inconsistent staff guidance and enforcement-driven interpretations, a state of affairs the industry has repeatedly complained raises compliance costs and pushes institutional money offshore.
The proposal has not been made public, and its final shape remains uncertain. The Office of Management and Budget can request changes before sending the proposal back to the SEC, and the commission would then vote on whether to release it for public comment. That means months of process still stand between the current draft and any binding rule.
A deliberate pivot from enforcement to rulemaking
The custody push is part of a broader transformation at the agency under Atkins, who became chair in 2025 and vowed to end the previous “regulation through enforcement” approach that defined the SEC’s relationship with the crypto industry during the prior administration.
Under Atkins, policymaking is meant to flow through formal rulemaking channels rather than lawsuits and settled orders. The shift has been visible in enforcement as well: the SEC dismissed several high-profile cases against major crypto companies in 2025, including its landmark lawsuit against Coinbase, as it restructured its approach to digital assets.
The custody proposal also fits neatly into the Trump administration’s digital asset agenda. Bloomberg reported that the rule is part of the agency’s effort to advance that agenda while the CLARITY market structure bill remains stalled in the Senate. The bill is expected to face a cloture vote after lawmakers return from the August recess in September, and its fate could shape how much of the heavy lifting regulators must do on their own.
Why custody matters so much for crypto
Custody has been one of the thorniest practical questions in institutional crypto. Traditional custody rules were written for securities held at qualified custodians like banks, and applying that framework to assets that can move onchain in minutes, sit in smart contracts, or require key management has proven awkward.
For investment advisers, the ambiguity has had real consequences. Firms offering crypto exposure to clients have had to make judgment calls about which custodians qualify, how to treat assets staked on proof-of-stake networks, and whether novel arrangements like qualified custodians partnering with third-party key-management providers satisfy the rules.
A clear, crypto-aware custody rule could unlock participation from advisers who have so far stayed on the sidelines. It could also resolve questions around staking, where assets held for clients generate rewards but may technically leave the custodian’s direct control.
What happens next
The immediate next step belongs to the Office of Information and Regulatory Affairs, which reviews significant rules before they are proposed. That review typically involves meetings with industry groups and other stakeholders, and edits to the draft are common.
If the office signs off, the SEC would schedule a vote to publish the proposal for public comment. A comment period would follow, usually lasting 60 days or more, after which the commission would draft a final rule in light of the feedback.
Industry observers expect intense interest. Asset managers, custodians, exchanges and trade associations have all pushed for custody reform, and the specifics of the draft, particularly how it treats staking, onchain settlement and third-party key management, will be scrutinized closely.
The timing is notable. With Congress gridlocked over market structure legislation, the SEC’s rulemaking agenda has become the primary vehicle for US crypto policy. The custody rule joins a pipeline that already includes proposals on tokenization and broker-dealer treatment of crypto assets, and more items are expected as the agency works through its agenda under Atkins.
For the crypto industry, the White House review is a signal that the regulatory thaw is producing tangible paperwork. Whether the final rule delivers the clarity institutions want, or introduces new constraints of its own, will only become clear once the draft text becomes public.
Atkins actually pushing custody clarity, didnt expect it this fast. advisers have been guessing since the 2019 guidance
the qualified custodian mess is why funds parked assets offshore. fix that and the inflows follow, imo
offshore parking was half fees and half paranoia tbh. a real bankruptcy remote standard fixes the paranoia half, the fee part stays put
OIRA review can drag on for months though. submitted Aug 25 doesnt mean anything binding lands soon
Atkins actually running custody reform through rulemaking instead of subpoenas, wild concept. Question is whether OMB guts the qualified custodian part before the public ever sees the draft.
they have been months away from a custody rule since 2019 lol. believe it when the Federal Register entry drops
months away since 2019 lol. but a federal register entry with an actual comment period is still more than the enforcement memo era ever gave us
OIRA review has a statutory clock on it, 90 days max. so at least there is a hard deadline this time. the 2019 era was open ended promises
90 days from aug 25 lands near thanksgiving. add a comment period after and nothing binding moves before 2027
comment period plus final vote plus effective date, yeah 2027 at best. still faster than the 2019 guidance ever moved tbh
2019 guidance to 2026 rulemaking is a seven year puberty. but a real bankruptcy remote standard would unlock the pension money everyone keeps promising
pension allocators also need their auditors comfortable, a rule alone wont do it. but agreed this is the first real movement since the 2019 letter
the qualified custodian test is the whole ballgame. if OMB waters it down to exchange custody plus a checkbox, advisers get clarity that is worth nothing
if the qualified custodian test survives OIRA review intact this actually changes fund structures. watered down and its just exchange custody with paperwork
notarysheen gets it, the qualified custodian test is everything. remember when client coins sat locked in estate limbo for years after those 2022 bankruptcies. if Atkins rule forces real bankruptcy-remote segregation its worth the wait
Advisers have waited years for clarity here. If the proposal keeps the blanket restriction on exchange custody, the offshore drift just continues anyway.
^ the offshore point is underrated. the big custodients arent spinning up Dublin and Zurich structures for fun
^ and the offshore structures carry their own compliance costs. clarity only wins if staying onshore is actually cheaper than the Dublin workaround
Relying on enforcement memos since the 2019 guidance was never a real custody framework. An actual rule with a public comment period beats another decade of no-action letters.
atkins spent years saying custody was the bottleneck for fund inflows. sending it to OIRA before labor day is the first real timeline signal we have had
The qualified custodian test might actually work if OIRA doesn’t water it down. But Wall Street will lobby hard to keep the status quo
True, and the offshore costs are real. But what happens when all the major players just move their operations to jurisdictions with lighter touch regulation?
The real test isn’t the qualified custodian framework itself – it’s whether SEC actually enforces it consistently. History suggests they won’t
consistent enforcement is the ask that never gets met tho. even the 2019 guidance got applied unevenly depending on which regional office you drew
fair point on the regional offices, but this one goes through OIRA with a 90 day statutory cap, not enforcement discretion. different animal than the 2019 guidance
staking is the sleeper issue here. client assets earning rewards while technically outside custodian control breaks the old qualified custodian definition entirely