The U.S. Securities and Exchange Commission (SEC) has submitted a draft revision of a crypto asset custody rule to the White House for review. This means that the new round of crypto regulations targeting investment advisers and investment companies has entered the preliminary stage of the formal process.
Submitted to the White House for review on August 25
According to disclosures, the draft was submitted to the White House Office of Management and Budget (OMB) on August 25. The SEC will not release the full text or proceed to a commission vote until the OMB completes its review.
This revision centers on a key issue: how investment advisers and investment companies should hold crypto assets for clients under the existing SEC custody rules. The SEC stated that certain current rules were established before crypto assets entered the regulated investment landscape, leading to ongoing uncertainty about their applicability.
The key is to clearly define the cryptocurrency custody method.
Under the SEC’s current framework, if a registered investment adviser has custody of client funds or securities, the assets are typically required to be held by a “qualified custodian,” unless an exception applies.
However, the custody of crypto assets differs from that of traditional securities. Private key control, on-chain ownership verification, and blockchain-based custody systems introduce new interpretive challenges for existing regulations. The focus of this draft is to address these regulatory gaps.
At the same time, the SEC is also considering removing outdated requirements that no longer align with current market trading and asset holding practices. This means that the revision is not only about adding new cryptocurrency provisions but may also simultaneously update obsolete elements within traditional custody rules.
Different from the 2025 withdrawal plan
This is not the first time the SEC has addressed cryptocurrency custody issues. In March 2023, the SEC proposed a “Customer Asset Protection” rule aimed at expanding custody obligations for registered investment advisers and bringing more customer assets under its scope, including cryptocurrencies.
At the time, the industry had significant concerns about this proposal. One reason was that many crypto custodians might not meet the definition of a “qualified custodian,” which would limit the options available to investment advisors for holding digital assets on behalf of their clients.
In June 2025, the SEC withdrew the proposal introduced during the tenure of former Chair Gary Gensler, stating that any future regulatory action in this area would require a new proposal to be initiated. The current custody amendments under review are part of a separate, independent rulemaking initiative launched under Chair Paul Atkins.
A public comment period will follow.
After OMB completes its review, the draft will be returned to the SEC, where commissioners will decide whether to formally issue the proposal. If approved, the full text will be made public for the first time.
Following standard procedure, after the proposal is made public, there is typically a minimum 60-day comment period during which investment advisers, investment companies, custodians, crypto firms, and other relevant parties may submit feedback. SEC staff will then review the comments and may revise certain provisions before submitting the final version for another vote by the Commission.
Additional information: This year, the SEC has also included crypto assets, broker-dealer rules, and market structure on its 2026 regulatory agenda, with efforts aligned alongside congressional initiatives on digital asset market structure legislation.