The U.S. Securities and Exchange Commission (SEC) has proposed a new regulatory framework that could change how registered investment advisers and regulated funds custody crypto assets in the United States. Most notably, the proposal would allow advisers and regulated funds to self-custody certain crypto assets under specified conditions and permit eligible state trust companies to serve as crypto custodians.

The proposal comes as traditional financial institutions continue expanding their exposure to digital assets, tokenised securities and blockchain-based financial infrastructure. EtherWorld has previously tracked this institutional shift in Why Institutions Are Suddenly Taking Ethereum Seriously? and Ethereum Institutional Secures Funding From 100+ Ecosystem Supporters.

SEC Wants a Crypto-Specific Custody Framework

Existing securities regulations generally assume that financial assets are held through banks, broker-dealers or other recognised custodians. Crypto assets can operate differently because possession or control of private keys may determine the ability to transfer an asset.

According to the Commission's October 1 announcement, the proposed amendments would allow advisers and regulated funds to self-custody crypto assets in certain circumstances while also allowing state trust companies to custody qualifying assets subject to conditions.

The distinction is important because the framework does not automatically cover every cryptocurrency. Commissioner Hester Peirce noted that the proposed Advisers Act custody provisions would apply to crypto assets that fall within the relevant categories of funds or securities, while Investment Company Act requirements would apply to securities or similar investments held by regulated funds.

Earlier this year, the SEC reiterated that tokenising an asset does not remove existing securities-law obligations. EtherWorld covered that clarification in SEC Reaffirms Securities Laws Apply to Tokenisation.

The issue is becoming more significant as tokenised assets move beyond experimental blockchain projects. Traditional funds, bonds and other financial instruments are increasingly being represented onchain, a trend examined in Are We Entering the Tokenisation Economy? and Where RWAs Go Next: 6 Projects to Watch.

Self-Custody Could Change Institutional Crypto Access

For crypto-native users, self-custody is common. Institutions, however, operate under fiduciary, compliance, accounting, cybersecurity and asset-segregation requirements that make custody substantially more complicated. SEC Chairman Paul Atkins said existing rules have not kept pace with the growth of digital assets.

Since Bitcoin's introduction, Atkins said, crypto has developed from a niche market into a multi-trillion-dollar asset class sought by investors. The problem, according to the chairman, is that custody requirements designed for an earlier financial system have left advisers uncertain about how they can lawfully provide exposure to crypto assets.

Commissioner Mark Uyeda similarly argued that the principles behind custody remain important even if the mechanics evolve. Asset segregation, internal controls and protection against theft or misuse remain necessary, but custody of blockchain-based assets cannot always operate identically to paper certificates stored through traditional financial infrastructure.

Stablecoins, for example, are already expanding beyond crypto trading into payments, treasury management and settlement. EtherWorld explored that transition in What Enterprises Need to Know About: Stablecoins.

The tokenisation market is moving in a similar direction. Institutions are experimenting with tokenised money-market funds, government debt, private credit, equities and other real-world assets.

Even governments and regulators outside the United States are beginning to confront similar custody questions. Maharashtra's proposed framework for blockchain-based property tokenisation, covered in Maharashtra’s DELTA Act Could Bring Real Estate Onchain, highlights how custody becomes increasingly important once legally recognised assets begin moving onchain.

A clearer U.S. framework could therefore affect more than Bitcoin or Ethereum exposure. It could eventually become relevant to a much broader market of tokenised securities and blockchain-based investment products.

Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace.

To that end, today’s proposal would… https://t.co/9C5LvRb8b5

— Paul Atkins (@SECPaulSAtkins) October 1, 2026

SEC Continues Broader Crypto Rulemaking Push

Throughout 2026, the SEC has been building a broader framework around crypto assets, tokenisation and blockchain-based financial markets. Atkins said the Commission's recent work has included guidance on tokenised securities, interpretations addressing when crypto assets may fall under securities regulation, broker-dealer considerations around tokenised securities and proposals for tailored crypto-asset offerings.

In August, the U.S. Treasury proposed implementation rules for the GENIUS Act covering the issuance and distribution of payment stablecoins. EtherWorld examined those rules in These New GENIUS Rules Could Reshape Crypto in America.

Asset managers also need clarity around where assets can be stored, who controls them, what happens when keys are compromised, how holdings are audited and which entities can legally act as custodians. Custody therefore sits beneath much of the emerging institutional crypto market.

Proposal Now Heads to Public Comment

The proposal will remain open for public comment for 60 days after its publication in the Federal Register. During that period, investment advisers, asset managers, custodians, state trust companies, crypto firms and other market participants will be able to submit feedback.

The SEC will need to determine what operational safeguards should apply when investment advisers self-custody crypto assets, how firms should demonstrate control of private keys, what cybersecurity requirements are appropriate and under what conditions state trust companies should qualify as custodians.

Regulators will also have to balance two objectives: expanding access to digital assets while ensuring that investors remain protected against theft, misappropriation, operational failures and weak internal controls.

India, for example, continues debating how crypto assets should fit within its financial regulatory system. EtherWorld examined those discussions in Will India Regulate Crypto? What to Expect From Monsoon Session and India's RBI Rejects Crypto Legal Status Before Finance Panel.

India has simultaneously expanded tax and transaction-reporting obligations through its Crypto-Asset Reporting Framework, covered in India Issues New Crypto Tax Rules From 2026. Different jurisdictions are taking different paths, but custody is becoming a common regulatory question as crypto becomes increasingly connected with conventional finance.

To promote your Web3 articles, events, and projects, you may reach out anytime via EtherWorld PR for submissions and collaboration.

Related Articles

• SEC Reaffirms Securities Laws Apply to Tokenisation
• Why Institutions Are Suddenly Taking Ethereum Seriously?
• Ethereum Institutional Secures Funding From 100+ Ecosystem Supporters
• Are We Entering the Tokenisation Economy?
• Where RWAs Go Next: 6 Projects to Watch

To follow blockchain news, track Ethereum protocol progress, and read our latest stories, subscribe to our weekly today.

Join the EtherWorld & Avarch Internship Program and build your career in blockchain, content, social media, video, podcast editing, or operations. Send your resume and brief introduction to contact@etherworld.co.