The U.S. Securities and Exchange Commission has sent its crypto custody proposal to the White House for review. The plan focuses on how investment advisers and investment companies can hold digital assets under existing federal rules.
The Office of Information and Regulatory Affairs received the proposal on Aug. 25. The office is part of the White House Office of Management and Budget. The proposal remains under review. The SEC has not yet released the full text.
SEC Targets Crypto Custody Rules
The proposed rule changes would amend provisions of the Investment Advisers Act of 1940. They would also affect the Investment Company Act of 1940.
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The SEC noted that the industry had asked questions regarding crypto custody. The current regulatory guidance was outdated due to the rise of cryptocurrencies in the context of regulated investment vehicles.
Under the Investment Advisers Act of 1940, registered advisers typically must maintain clients’ funds and securities with a qualified custodian. Certain exemptions apply.
Crypto custody of assets presents unique issues. In certain cases, it relies on private keys and blockchain technology.
The SEC intends to provide clarification in relation to the applicability of those rules to digital assets. It is also going to amend certain other requirements for client and fund assets.
Certain obsolete provisions would likely be deleted as market practices have evolved and new ways of holding assets have emerged.
New Proposal Follows Earlier Withdrawal
The most recent attempt at crypto asset custody comes after an internal policy change at the SEC. On June 12, 2025, the SEC rescinded its Safeguarding Advisory Client Assets proposal.
The proposal had aimed at expanding the custody rules to include more client assets. Crypto assets were among these assets to be considered. It would have also required all covered assets to be held by qualified custodians.
There was controversy in the crypto space about the move. Most digital asset custodians did not qualify for the newly proposed definition of a qualified custodian.
The SEC has now rescinded the proposal, stating that any further steps will require the commission to start the rulemaking process from scratch. This move comes as part of a separate attempt by SEC Chairman Paul Atkins.
Crypto Regulation Remains on SEC Agenda
The custody rule is one of several crypto proposals by the SEC. The SEC has also outlined plans related to proposals on digital assets, broker dealers, and market structure. There might be rules addressing exemptions and safe harbor for crypto entities.
There are other proposals related to crypto trading on regulated platforms and tokens. Congress is also considering crypto market structure legislation separately from SEC’s efforts. That legislative initiative will also include discussions about the SEC-CFTC jurisdiction division in relation to crypto assets.
The SEC can advance crypto custody rules for registered investment advisers under its existing statutory authority. That means the agency does not need to wait for Congress to pass broader crypto market structure legislation before moving forward with this rulemaking.
It will have to be reviewed and approved first in the White House process. The agency can then consider the publication of that rule. It will make the full proposal public.
The SEC can start a public comment period after that. Investment advisers, custodians, investment companies, and crypto businesses can submit their views. The SEC can change the proposal after reviewing the feedback. Finalizing the rule will take another commission vote.
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