Crypto custody proposal

Proposed on 1 October 2026 (Release Nos. IA-7023; IC-36353): new rules and amendments under the Advisers Act and the Investment Company Act addressing how advisers and regulated funds can custody crypto assets. It would permit an adviser to self-custody client crypto assets when it determines no permitted custodian is available, subject to conditions; permit crypto assets to be held with a state trust company, subject to conditions; redesignate the custody rule from Rule 206(4)-2 as Rule 223-1 under Section 223 of the Advisers Act and modernize it; modernize the Investment Company Act custody rules; and add matching recordkeeping, Form ADV and Form N-CEN requirements.

• 01Self-custody, as proposed: the adviser determines no permitted custodian is available before taking custody and quarterly after; has documented safeguarding expertise for each asset; keeps each client's crypto assets at addresses holding only that client's assets; requires joint authorization by at least two people; reviews safeguarding and cybersecurity at least annually; gets internal control reports from an independent public accountant within six months and annually; and sends clients account statements at least quarterly.
• 02State trust company custody, as proposed: before engaging one and annually, a reasonable basis after due inquiry that it is authorized by its state banking authority to custody crypto assets and has written safeguarding policies; review of its most recent audited financial statements and internal control report; and client assets segregated from its own.
• 03Custody rule modernization, as proposed: exceptions for discretionary trading authority, standing letters of authorization (from independent verification) and inadvertent custody; no PCAOB registration and inspection requirement for the accountant; changes to audited financial statement delivery for funds of funds and late-year pools; and the client account number in the notice sent when a qualified custodian account opens.
• 04Recordkeeping, as proposed: records kept on a crypto network could satisfy the books and records rules, subject to conditions.
• 05Worth doing now if the firm advises on crypto assets: inventory which assets are held, by whom and how, so the firm can comment on the proposal with facts and is ready if it is adopted.