The U.S. Securities and Exchange Commission proposed new custody rules Thursday that directly address a structural constraint on institutional crypto deployment: the absence of a compliant self-custody pathway for registered investment advisers, investment companies, and business development companies.
The framework permits crypto assets to be held in self-custody under defined conditions and authorizes state trust companies to act as custodians for regulated entities and their clients. SEC Chairman Paul Atkins framed the move as a response to outdated regulations that "failed to keep pace with the rapid expansion of digital assets."
The proposal matters because custody has been a binding constraint on institutional adoption. Historically, institutional investors either rely on a handful of specialized crypto custodians—concentrating counterparty risk—or abstain from direct exposure. Self-custody options for regulated entities were unclear under existing SEC guidance, creating legal ambiguity that risk-averse institutional allocators avoid entirely.
The SEC developed this framework using existing authority rather than waiting for congressional action. The Clarity Act, which would have codified comprehensive crypto market structure rules, stalled in the Senate in September. Atkins' approach pivots to incremental rulemaking: custody follows prior SEC moves on tokenization exemptions and trading venues.
Jeff Ko, chief analyst at blockchain infrastructure provider ViaBTC, characterized the strategy as "using the authority it already has to solve individual bottlenecks one by one." Reduced custody concentration could lower friction costs for institutional entry—a material variable for capital flows into the sector.
The SEC will accept public comment for 60 days following Federal Register publication. Industry participation in that process will likely focus on the precise conditions under which self-custody qualifies as compliant.
