The SEC Just Told Fund Managers They Can Hold Your Crypto Keys Themselves. The Catch: Every Quarter They Have to Write Down That Nobody Else Will

In 2023 the SEC proposed a rule that would have told investment advisers to keep client crypto with a qualified custodian: a bank, a broker-dealer, or a similar regulated institution. Most crypto exchanges and wallet providers didn’t meet that definition.

On Thursday, October 1, 2026, the SEC proposed something close to the opposite.

Under the new framework, a registered investment adviser could hold a client’s crypto private keys in-house if it concludes that no permitted custodian is available for that asset. It would have to write that conclusion down before it starts and again every quarter after that.

It isn’t retail self-custody. It’s the fund manager acting as its own custodian, which is the arrangement the 2023 proposal was designed to stop.

What the SEC Actually Proposed

The proposal (release IA-7023) amends custody rules under both the Investment Advisers Act of 1940 and the Investment Company Act of 1940. It covers registered investment advisers (RIAs) and regulated funds, meaning registered investment companies and business development companies.

It has three main parts.

1. Advisers can self-custody, with conditions. According to the SEC and reporting from The Block and Bitcoin.com, an adviser holding client crypto itself would need:

• A written determination, made before taking custody and reassessed quarterly, that no permitted custodian is available to hold that asset
• Documented expertise in safeguarding each crypto asset it holds
• Private key management systems, with at least two people authorizing any crypto transaction
• Separate blockchain addresses for each client, so client assets aren’t commingled
• Cybersecurity controls and a security review at least once a year
• Quarterly account statements to clients
• An annual report from an independent accountant

2. State trust companies become qualified custodians. State-chartered trust companies are explicitly added to the list of entities that can hold client and fund crypto. They’d face their own checks: initial and annual authorization reviews, security policy reviews, review of audited financials and internal control reports, and segregation of customer holdings from the custodian’s own assets.

3. Broader modernization. The proposal also updates audit requirements for RIAs, lets broker-dealers act as custodians for certain regulated funds, and adds an exception for standing letters of authorization.

The comment period runs 60 days from publication in the Federal Register. Nothing is final yet.

”The Illusion of Protection”

SEC Chairman Paul Atkins framed the proposal as the agency catching up:

“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.”

According to The Block, he also said: “More regulatory proposals are on the horizon, and I look forward to continuing to help President Trump cement the United States as the crypto capital of the world.”

Commissioner Mark Uyeda’s statement went after the old approach directly. He wrote that the existing custody framework “still bears the imprint of a bygone era when custody meant safekeeping paper documentation,” and that “rules that are unworkable in practice will not protect investors but merely provide the illusion of protection.”

Uyeda said the 2023 proposal created a “no-win scenario,” because it required advisers to use custodians that weren’t available to serve them. He also pointed to SAB 121, the since-rescinded accounting bulletin that he said “had already effectively deterred companies from safeguarding crypto-assets.”

Three Years, Full Reversal

Here’s how the SEC’s position changed:

• February 2023: Under Gary Gensler, the SEC proposes the Safeguarding Advisory Client Assets rule. It extends custody requirements to essentially all client assets, crypto included, and pushes advisers toward qualified custodians that mostly didn’t serve crypto.
• June 12, 2025: The SEC formally withdraws that proposal, along with 13 other Gensler-era rulemakings.
• October 1, 2026: The SEC proposes letting advisers hold crypto themselves when custodians aren’t available, and adds state trust companies to the custodian list.

The timing matters too. Commissioner Hester Peirce had set October 2 as her last day at the SEC, which would leave the commission with two members, Atkins and Uyeda. The custody proposal came out the day before. The final rule will most likely be adopted by a two-person commission, with no dissenting vote.

It’s also part of a run of rulemaking since the Senate killed the CLARITY Act. The SEC released an innovation exemption for tokenized stocks. The CFTC sent its crypto rulebook to the White House and is now rewriting the definition of a swap for prediction markets. With no market structure law from Congress, the agencies are writing the rules themselves.

The State Trust Company Angle

The trust company provision got less attention, but it may matter more.

Wyoming and New York both charter crypto trust companies. On the same day the SEC published its proposal, Wyoming’s Division of Banking and New York’s Department of Financial Services signed a Memorandum of Understanding to coordinate crypto oversight. It includes a fast-track for applications from firms that have held a license for three years in good standing and propose a substantially similar business model, plus joint examinations where practicable.

So the SEC is moving to make state trust companies qualified custodians, and two of the biggest state charterers just agreed to coordinate on licensing them. For crypto-native custodians that have been shut out of serving RIAs because they weren’t federally chartered banks, that combination is the opening.

The Fine Print Worth Watching

• Self-custody is a fallback. The quarterly written determination means an adviser has to keep showing that no permitted custodian will hold the asset. For BTC and ETH, plenty of custodians will. In practice the self-custody path is mostly for long-tail tokens, new assets, and anything a custodian hasn’t added yet. Atkins said custodial support lags new assets by months.
• “Self-custody” here doesn’t mean what crypto people usually mean. It means the adviser holds the client’s keys, not the client. Your coins would still be under someone else’s control, just with an audit trail.
• It’s a proposal. There’s a 60-day comment window, then a final rule. Expect custody banks to argue that if no qualified custodian exists, the asset shouldn’t be in a client account in the first place.

Why This Matters for Crypto Jobs

Custody has been the bottleneck for a lot of traditional money that wanted crypto exposure through something other than an ETF. If the rule is finalized in anything like this form, the hiring effects are easy to see:

• RIAs and hedge funds will need in-house custody people. Two-person authorization, private key management systems, annual security reviews and per-client address segregation all need operations staff, security engineers and someone who understands MPC and multisig setups.
• Compliance roles get a new checklist. Quarterly custodian-availability determinations, client disclosures and accountant reports all need people to write and maintain them. Crypto-literate compliance officers at traditional advisers are scarce.
• State trust companies get a bigger addressable market. Becoming eligible to hold RIA and fund assets turns Wyoming and New York trust charters into an institutional business, and those firms will need BD, ops, security and regulatory staff.
• Audit firms need crypto specialists. Independent accountant reports on adviser self-custody mean someone has to audit key management, and few people can.
• Security engineers specifically. The proposal is effectively a spec for institutional key management. If you’ve built signing infrastructure, HSM workflows or MPC wallets, your skills match what asset managers will need.

The SEC’s position is that asset managers can handle crypto themselves if they can prove they’re doing it properly. Each of the conditions in the proposal will take staff to meet.

Looking for a role in custody, security, or crypto compliance? Browse hundreds of open Web3 positions at Cryptogrind and get in before the institutional hiring wave hits.