The SEC restarts its custody rule — a fight about who may hold the keys

The US Securities and Exchange Commission has taken the first procedural step toward a new rule on custody, the question of who is allowed to hold client assets, including crypto, on a professional's behalf. On Aug. 25 the agency sent a proposal listed as Amendments to the Custody Rules to the Office of Information and Regulatory Affairs, part of the White House Office of Management and Budget, for review. The text is not public, and nothing changes for anyone yet.

The next steps are slow by design. The White House office reviews the proposal and can ask for changes before sending it back, after which the commission would vote on whether to release it for public comment. According to the SEC's own regulatory agenda, the effort would modernize the rules covering custody of investment adviser client assets and fund assets, including crypto assets, and would remove burdens from provisions the agency describes as outdated. The agenda suggests October, but the SEC's timing estimates slip routinely: its Regulation Crypto Assets proposal was first pencilled in for April and arrived in August.

This is a second attempt at a rule that failed loudly the first time. In 2023, under then-Chair Gary Gensler, the SEC proposed forcing investment advisers to keep client crypto with a narrow set of qualified custodians, which in practice meant a chartered bank or trust company, an SEC-registered broker-dealer, or a futures commission merchant regulated by the CFTC. Gensler said plainly that advisers could not rely on crypto platforms as qualified custodians given how those platforms generally operate. The objections were unusually broad, coming from financial firms, crypto platforms and even other parts of the government, with lawyers at the Small Business Administration warning that the effort drastically underestimated its potential impacts and the investment firm a16z calling it illegal, infeasible and dangerous. It never won final approval and was pulled last year.

The ground has shifted since. Paul Atkins, chair since 2025, has made friendlier crypto rules a central project, moving the agency from enforcement toward formal rulemaking and dismissing several cases in 2025, including the lawsuit against Coinbase. The industry has also won a wave of new federal trust bank charters, so far more institutions can legally hold these assets than could three years ago. The language on the agenda, about removing burdens rather than restricting venues, points the same direction. What the rule actually says will not be known until it is published.

For a beginner, the useful part is the word itself. Custody just means who controls the keys, and this proposal is about professionals who hold other people's assets, not about the wallet on your phone. But the same question decides your own risk: if a company holds your coins, what you own is a claim against that company, not a coin. And a practical note while headlines like this circulate, no regulator will ever contact you to say a new rule requires you to move, verify or unlock your coins. That message is a scam pattern, not a rule change.