SEC Proposes Crypto Custody Rules for Advisers and Funds
On 1 October 2026 the US SEC proposed letting advisers and funds self-custody crypto or use state trust companies. The rules, and what they mean for India.
The US Securities and Exchange Commission (SEC) on Thursday, 1 October 2026, proposed rules that would let registered investment advisers and regulated funds hold crypto assets themselves in limited cases, or keep them with state-chartered trust companies. Nothing changes yet: it is open for 60 days of public comment.
Key takeaways
- Advisers could self-custody a client's crypto only if no permitted custodian is available for that asset, checked before taking custody and every quarter after.
- Self-custody would come with strict conditions, including two-person approval for every transaction and a separate on-chain address for each client.
- State trust companies authorised for crypto custody by their state banking authority could hold client crypto, kept apart from their own assets.
- Here "self-custody" means the adviser holding coins for clients. It is not about individuals keeping their own coins.
- India has no equivalent custody rulebook for crypto platforms, so these conditions make a useful checklist.
What the SEC proposed
US custody rules for advisers and funds come from two laws of 1940 and were written for shares and bonds. Banks count as permitted custodians, but whether a state trust company counts as a "bank" depends on a case-by-case reading of the law. Custodians also do not support every token, so some advisers have had no compliant place to keep certain coins.
The SEC's answer is a self-custody route for when no custodian is available, plus a clear path for state trust companies. SEC Chairman Paul S. Atkins said the proposal would give "investment advisers and funds a compliant pathway where none existed before". It follows the Senate's rejection of the CLARITY Act on 15 September; see how the White House turned to the SEC.
The conditions for adviser self-custody
| Condition | What the adviser would have to do |
|---|---|
| No custodian available | Decide that no permitted custodian can hold the asset, before taking custody and quarterly after |
| Expertise and safeguards | Document its expertise and run safeguards against loss and theft, reviewed yearly |
| Keys and approvals | Cover private key management and require at least two people to authorise any transaction |
| Separate addresses | Keep each client's crypto in addresses that hold only that client's assets |
| Cybersecurity | Manage cyber risks and review its controls at least once a year |
| Outside check | Get an internal control report from an independent public accountant within six months, then yearly |
| Client reporting | Send account statements at least every quarter |
| Legal status | Agree in writing with the client to treat each crypto asset as a "financial asset" under state law |
For a regulated fund, the fund's board would also have to oversee the arrangement.
State trust companies and other changes
An adviser or fund could use a state trust company as custodian if, before engaging it and every year after, it has a reasonable basis to believe that:
- the state banking authority has authorised the trust company to provide crypto custody;
- the trust company follows written policies designed to protect crypto and related cash from theft and loss;
- the adviser has received and reviewed its latest audited financial statements and internal control report.
Client crypto must also be kept separate from the trust company's own assets. Among other changes, records kept on a blockchain could satisfy record-keeping rules, and adviser and fund filings would collect more data on crypto and tokenised fund shares.
Why it matters for Indian investors
A clear rule on where US advisers may keep bitcoin and other coins could make it easier for more of them to offer crypto strategies. If you hold US-listed crypto funds through the overseas route, see our guide on buying a Bitcoin ETF from India under LRS.
The bigger lesson is closer to home. India has no dedicated custody rulebook for crypto platforms. Exchanges serving Indians must register with FIU-IND, but that registration is about anti-money-laundering duties, not a licence. Explaining why FIU-IND does not publish its list, the Finance Ministry told the Lok Sabha on 30 March 2026 that a public list could mislead users into assuming regulatory protection in case of fraud or loss. The WazirX hack of July 2024, when about $230 million was taken from one of its wallets, showed the risk; see whether WazirX is safe now.
Use the SEC's conditions as your own checklist: ask whether your exchange keeps most coins in cold storage, needs two people to approve large transfers, publishes proof of reserves and has outside audits. Start with our list of FIU-registered crypto exchanges, read what happens to your crypto if an exchange shuts down, and consider moving long-term holdings to your own wallet using our hot vs cold wallet guide.
What happens next
The 60-day comment period starts when the proposal appears in the Federal Register. The SEC may change the text before any final vote, so advisers cannot rely on it yet. Track the Bitcoin price in INR as US rule changes come through.
FAQ
What did the SEC propose on 1 October 2026?
The SEC proposed custody rules that would let US investment advisers and regulated funds self-custody crypto when no permitted custodian is available, or use authorised state trust companies. It is open for 60 days of comment.
Does the SEC custody proposal apply in India?
No. It covers US-registered advisers and funds only. Indian crypto platforms register with FIU-IND for anti-money-laundering purposes, and India has no comparable crypto custody rule.
Can individuals still hold their own crypto under the SEC proposal?
Yes. The proposal is about advisers holding coins on behalf of clients. It does not limit individuals who keep crypto in their own wallets.
This article is AI-assisted, educational and general in nature. It is not financial advice and never a guarantee of profit. Every trade is at your own risk on your own exchange. See our risk disclosure and editorial policy.
