The SEC has moved a major crypto custody rewrite into the White House review process, advancing a rulemaking that could reshape how investment advisers and funds hold digital assets. What happened - On Aug. 25 the Securities and Exchange Commission sent a proposed overhaul of its custody rules for registered investment advisers and investment companies to the White House Office of Management and Budget (OMB). That starts the required executive review before the SEC can publish the proposal and seek a commission vote. - Full text and specifics remain confidential while OMB conducts its review. Once returned — potentially with edits — the SEC’s three current Republican commissioners would vote on whether to publish the proposal for public comment. What the proposal aims to do - Clarify how advisers and funds may custody crypto assets while complying with existing custody rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. - Address gaps and uncertainty that arose because current custody regulations were written before crypto became a routine part of investment products and advisory portfolios — for example, when ownership and control hinge on private keys and blockchain-based custody systems. - Potentially remove some legacy custody requirements the SEC now views as outdated due to changes in markets and modern asset-holding practices. - Be classified as “economically significant” on the federal regulatory agenda, meaning the SEC will evaluate expected costs, benefits and other economic effects as it develops the rule. Why this matters to the industry - The proposal could clarify which custodians and custody arrangements meet the SEC’s requirements for advisers and funds — a critical question for crypto custodians and the advisers that rely on them. - A prior approach, the Safeguarding Advisory Client Assets rule first proposed in March 2023 under former Chair Gary Gensler, would have broadened custody obligations to cover more client assets (including crypto) and generally required qualified custodians. That draft was withdrawn in June 2025 after industry concerns that many crypto custody providers did not meet the proposed “qualified custodian” definition. - The new custody amendments are a fresh rulemaking under Chair Paul Atkins and are not a continuation of the withdrawn Gensler-era proposal. Specifics on qualified custodians, custody arrangements and the SEC’s treatment of crypto assets will not be public until the proposal is published. Regulatory context and next steps - The custody rule is one of several crypto-focused items the SEC has placed into formal rulemaking under Atkins. In July the agency added three crypto-related proposals to its 2026 regulatory agenda covering: exemptions and safe harbors for crypto assets; how broker-dealer rules apply to firms handling digital assets; and market-structure rules for trading crypto on alternative trading systems and exchanges. - The custody proposal arrives as Congress negotiates the Digital Asset Market Clarity Act (the House passed its version, the CLARITY Act, in 2025). Senate talks in 2026 have focused on dividing authority between the SEC and the Commodity Futures Trading Commission (CFTC). Atkins has said the SEC will continue to act on issues that fall within its statutory powers even as lawmakers work on legislation where congressional authority is required. - The OMB review must finish before the proposal returns to the SEC. If commissioners vote to publish the proposed rule, it would typically be open for at least 60 days of public comment. The SEC staff would review comments, possibly revise the proposal, and then the commission would vote again on any final rule. Bottom line This custody rulemaking could deliver long-awaited regulatory clarity for how advisers and funds hold crypto — and it comes amid broader SEC efforts to put digital-asset rules on a formal track. Industry participants, custody providers and lawmakers will be watching OMB’s review and the SEC’s next move closely, since the details could materially affect custody practices, qualified custodian definitions, and the options available to advisers who manage crypto on behalf of clients.
SEC Sends Crypto Custody Overhaul to OMB for Review
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Summary
The U.S. Securities and Exchange Commission (SEC) has sent a proposed crypto custody overhaul to the White House OMB for review, citing ChainGPT. The draft aims to clarify how investment advisers and funds can hold digital assets under current rules. The proposal, separate from a prior withdrawn rule, will not be public until OMB completes its review. The move could impact CFT compliance and liquidity in crypto markets as the SEC works to formalize digital-asset regulations.
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