Key Points

• The SEC has sent a proposed overhaul of custody rules for investment advisers and investment companies to the White House’s Office of Information and Regulatory Affairs (OIRA) for review.
• The proposal could provide greater clarity on how advisers and funds hold crypto assets for clients under US securities regulations.
• The move comes as the SEC shifts toward formal crypto rulemaking while the CLARITY Act remains stalled in the Senate.

The US Securities and Exchange Commission is advancing a proposed overhaul of federal custody rules that could reshape how investment advisers and investment companies hold digital assets for clients. The proposal was submitted to the White House’s Office of Information and Regulatory Affairs on Aug. 25, marking another step in the regulator’s effort to establish clearer rules for cryptocurrency custody.

The proposal has not yet been made public and remains subject to review. OIRA can request changes before returning it to the SEC, after which the commission would need to vote on whether to release the proposal for public comment.

SEC Targets Rules Governing Client Assets

According to the SEC’s regulatory agenda, the agency is considering amendments or new requirements under the Investment Advisers Act and Investment Company Act.

The changes would address how investment advisers and funds safeguard client assets, including digital assets. The stated objective is to reduce uncertainty surrounding the ability of financial firms to custody crypto while remaining compliant with federal securities requirements.

The OIRA submission does not itself establish new custody requirements. Instead, it represents an intermediate stage in the federal rulemaking process.

The absence of a publicly available proposal means important details remain unknown, including the precise requirements the SEC may impose on crypto custody providers and how the rules would apply across different types of digital assets and investment vehicles.

For institutional investors, however, clearer custody requirements could be significant. Asset managers and investment advisers often need defined regulatory parameters before incorporating new asset classes into products and client portfolios.

Rulemaking Gains Importance as CLARITY Act Stalls

The custody initiative comes as Congress continues to debate broader cryptocurrency market-structure legislation.

The CLARITY Act is intended to establish a federal framework for digital assets and clarify the respective responsibilities of the SEC and Commodity Futures Trading Commission. The legislation remains stalled in the Senate and is expected to face further procedural action when lawmakers return from the August recess in September.

That has increased the importance of regulatory action by federal agencies. While agency rules cannot necessarily replace legislation on issues requiring congressional authority, formal rulemaking can address specific areas within existing statutory powers.

The custody proposal therefore represents a narrower regulatory step that could move forward even while lawmakers remain divided over broader market-structure legislation.

SEC Shifts Toward Formal Crypto Rules

The proposal also reflects the SEC’s broader change in approach under Chair Paul Atkins, who took office in 2025.

Atkins has criticized the agency’s previous reliance on “regulation through enforcement” and advocated formal policymaking through rulemaking. The SEC subsequently dismissed several cryptocurrency-related enforcement cases, including its lawsuit against Coinbase, as the agency began reshaping its digital asset strategy.

The custody review fits that broader direction by attempting to establish rules that market participants can evaluate before making compliance and infrastructure decisions.

For investment firms, the next important milestone will be whether the SEC approves the proposal for publication and what requirements ultimately appear in the public draft. If adopted, clearer custody rules could reduce one of the practical barriers facing institutional crypto adoption. At the same time, the proposal’s impact will depend on its treatment of different digital assets, custody structures and existing securities obligations. With Congress still working on comprehensive legislation, the SEC’s rulemaking process could become an important part of how the US defines the operating framework for institutional digital assets.