The SEC crypto custody rule has formally advanced: The U.S. Securities and Exchange Commission has formally submitted its proposed crypto custody rule to the White House Office of Management and Budget, advancing a long-anticipated overhaul that could reshape how investment advisers and investment companies hold digital assets on behalf of clients. The Aug. 25 filing places the rulemaking under executive review, a required step before the commission can publish the full proposal and seek a vote from its three sitting members.
Why the SEC crypto custody rule matters for advisers
Under the existing custody framework established by the Investment Advisers Act of 1940, registered advisers with custody of client funds or securities must generally keep those assets with a qualified custodian, unless a narrow exception applies. That structure was written long before crypto assets became part of regulated investment portfolios, leaving advisers uncertain about how to comply when ownership and control depend on private keys and blockchain-based custody systems.
The SEC has said firms have repeatedly raised those questions, prompting the agency to craft amendments that clarify how digital assets fit within existing requirements. The proposed amendments would apply to rules under both the Investment Advisers Act and the Investment Company Act of 1940, according to the SEC’s regulatory agenda. Alongside the digital asset provisions, the agency is also weighing the removal of certain custody requirements it considers outdated because of changes in financial markets and current trading practices.
A different path from the Gensler-era safeguarding plan
The new effort represents a meaningful departure from an earlier custody initiative that the SEC ultimately abandoned. First proposed in March 2023 under former Chair Gary Gensler, the Safeguarding Advisory Client Assets rule would have expanded custody requirements to cover a broader range of client assets, including cryptocurrencies, and would have mandated qualified custodians in most circumstances. Crypto custody providers faced significant uncertainty under that framework because many did not fit the proposed definition of a qualified custodian.
Industry participants warned that the requirements could leave investment advisers with fewer options for holding digital assets, potentially limiting client access to crypto exposure. The SEC withdrew the safeguarding proposal along with several other unfinished Biden-era rules in June 2025, stating that any future regulatory action in those areas would require a fresh proposal. The custody amendments now under White House review constitute that separate rulemaking effort under current Chair Paul Atkins.
Other digital asset work on the SEC’s agenda
Custody is only one piece of a broader digital asset agenda that the SEC has moved into formal rulemaking under Atkins. In July, the commission placed three crypto-related proposals on its 2026 regulatory agenda, covering crypto assets, broker-dealers and market structure. One proposal would consider exemptions and safe harbors for crypto assets, while another would examine how broker-dealer rules should apply to companies dealing with digital assets. A separate market structure proposal covers the trading of crypto assets through alternative trading systems and national securities exchanges.
Atkins has said the SEC can address issues that fall within its existing statutory authorities while Congress works on legislation covering areas that require new statutes. Crypto also received a dedicated place in the SEC’s 2026 to 2030 strategy released in June, which identified digital assets, blockchain infrastructure and tokenized financial products among areas the agency intends to address. The draft plan also called for clearer treatment of digital assets under federal securities laws and continued coordination with the Commodity Futures Trading Commission, even as Congress considers legislation that would formally divide responsibilities between the two regulators.
What happens next with the SEC crypto custody rule
Full details of the SEC crypto custody rule will remain unavailable until the Office of Management and Budget completes its review and returns the proposal to the commission, potentially with revisions. Once back at the SEC, the three current Republican members would vote on whether to publish the rule for public comment. Until that text is released, the specific requirements covering qualified custodians, custody arrangements and the treatment of crypto assets will remain unknown, leaving advisers and custody providers to wait for clarity on how the regulator intends to modernize a framework first drafted for a very different financial system.
Source: https://crypto.news/sec-moves-crypto-custody-rule-forward-with-white-house-review/
Industry observers say the timeline for finalizing the SEC crypto custody rule could stretch well into next year, depending on how quickly OMB acts and whether the proposal triggers broader political pushback. In the meantime, crypto-native firms and traditional banks are lobbying behind the scenes to shape provisions on qualified custodians, segregation of client assets, and permissible investment activities, hoping to secure a rule that accommodates digital assets without imposing legacy banking constraints that could stifle innovation. Their influence may prove decisive once public comment begins.
For now, the proposal sits behind closed doors at OMB, but the clock has started ticking on the broader SEC crypto custody rule timeline. Once published in the Federal Register, advisers will have a 60-day public comment window, after which the SEC must review the feedback and either revise the rule, withdraw it, or push forward to a final vote. Industry observers expect the rule to clear OMB by mid-September and reach the Federal Register by the end of Q4 2026.