The Securities and Exchange Commission submitted a proposal to the White House Office of Management and Budget on August 25 aimed at overhauling the custody rules governing how registered investment advisers and regulated funds hold digital assets. The move, first reported by Bloomberg, represents one of the most concrete regulatory actions yet under SEC Chairman Paul Atkins’ campaign to drag the agency’s crypto framework into the present decade.
The proposal targets custody requirements under both the Investment Advisers Act and the Investment Company Act. In practical terms, it would update the rules that dictate how the roughly 15,000 registered investment advisers in the US can store, safeguard, and account for crypto assets on behalf of their clients.
What the proposal actually does
The SEC’s submission to OMB focuses on three objectives: clarifying the existing custody framework for digital assets, modernizing regulations that were written for a pre-crypto world, and stripping out outdated provisions that the agency believes no longer serve meaningful investor protections.
Because the proposal is currently sitting with OMB for review, the specific regulatory text hasn’t been made public yet. The details could shift before the SEC formally publishes it. Once that happens, a public comment period of at least 60 days would follow before any final rule gets voted on.
Building on a pattern
This proposal doesn’t exist in a vacuum. Back in September 2025, the agency issued a no-action letter that gave the green light for select state-chartered trust companies to serve as qualified custodians for digital assets under specific conditions. That was a notable shift from the previous regime under former Chairman Gary Gensler, whose approach to crypto custody was considerably more restrictive.
The custody overhaul also appeared on the SEC’s Spring 2025 Unified Agenda, which explicitly flagged the need to modernize custody rules for crypto assets. Meanwhile, Atkins has been pushing other crypto-related regulatory updates, including a broader initiative around what the SEC has been calling Regulation Crypto Assets.
All of this is happening without the benefit of comprehensive market-structure legislation from Congress. Multiple bills have been introduced, debated, and stalled on Capitol Hill. In the absence of a legislative solution, the SEC is doing what agencies do: writing rules within its existing authority.
Why this matters for institutional adoption
Custody has always been one of the biggest friction points keeping traditional financial institutions from going deeper into crypto. Under the previous regulatory environment, many advisers simply avoided offering crypto to clients because the compliance burden was too uncertain. A qualified custodian for equities is straightforward: a bank, a broker-dealer, a futures commission merchant. A qualified custodian for Ethereum? That question didn’t have a clean answer.
The proposal also has implications for the competitive landscape among custodians. State-chartered trust companies that received the 2025 no-action letter already have a head start. Depending on how the final rule defines “qualified custodian” for digital assets, traditional banks, crypto-native custodians, and hybrid firms could all see their competitive positions shift significantly.
Whether OMB sends the proposal back with revisions or waves it through will be the next thing to watch. After that, the 60-day comment period will reveal just how much the industry, and its critics, want to reshape the final version.