The U.S. Securities and Exchange Commission has sent a proposed overhaul of crypto custody rules for investment advisers and investment companies to the White House for review.
Proposal Sent to White House OMB
The White House Office of Management and Budget received the proposal on Aug. 25, placing the planned rule changes under executive review before the SEC can release the full text and seek a commission vote. The proposal would clarify how investment advisers and investment companies can hold crypto assets for clients while complying with existing SEC custody requirements. The agency said firms have raised questions about how digital assets can be held under rules written before crypto became part of regulated investment products and advisory portfolios.
Alongside the provisions covering digital assets, the SEC is considering removing some existing custody requirements it considers outdated because of changes in financial markets and current trading and asset-holding practices. Full details of the proposal will remain unavailable until the Office of Management and Budget completes its review. This regulatory push runs parallel to legislative efforts like the CLARITY Act advocacy work shaping crypto policy in Congress.
SEC Crypto Custody Rule Would Modernize Requirements
The proposed amendments would apply to rules under both the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Under the existing investment adviser custody framework, registered advisers with custody of client funds or securities generally must keep the assets with a qualified custodian unless an exception applies. Crypto has raised additional questions over how those requirements work when ownership and control can depend on private keys and blockchain-based custody systems.
The commission has already considered a different approach to the issue. In June 2025, the SEC withdrew its safeguarding proposal introduced during former Chair Gary Gensler's tenure. First proposed in March 2023, the Safeguarding Advisory Client Assets rule would have expanded custody requirements for registered investment advisers to cover a larger range of client assets, including cryptocurrencies. The current regulatory landscape for crypto assets continues to evolve, with recent SEC filing reviews for XRP ETFs demonstrating the agency's active engagement with digital asset regulation.
Atkins Has Put Crypto Rules on the SEC Agenda
Custody is one of several digital asset issues the SEC has moved into formal rulemaking under Chair Paul Atkins. In July, the commission placed three crypto rule 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.
Atkins has said the SEC does not need to stop all crypto rulemaking while the legislation remains unresolved. In July, the chairman said the commission was prepared to use its existing powers if Congress failed to finish the market structure bill. Atkins said the SEC was ready, willing and able to act in areas under its authority while maintaining that legislation would provide a more durable framework for issues requiring action from Congress.
Custody Proposal Moves Forward as Congress Debates
The custody proposal reached the White House while the Senate continues work on the Digital Asset Market Clarity Act. The House passed its version of the CLARITY Act in 2025, while Senate lawmakers have spent 2026 negotiating their approach to issues including the division of authority between the SEC and CFTC. Once the proposal is returned to the SEC, potentially with revisions, the commission's three current Republican members would vote on whether to publish it for public comment.
