The SEC revived the crypto custody rule with a significant regulatory proposal for digital assets on August 25, 2026. S. Securities and Exchange Commission (SEC), under the leadership of Chairman Paul Atkins, has initiated a significant regulatory push for digital assets, reviving the crypto custody rule.
On August 25, 2026, the agency forwarded a crucial proposal, titled “Amendments to the Custody Rules” (RIN 3235-AN46), to the White House Office of Management and Budget (OMB) for review.
This move aims to modernize regulations governing how investment advisers handle client crypto assets.
Understanding the Crypto Custody Rule Shift
This latest effort signals a marked departure from the previous administration’s more stringent stance and reflects President Donald Trump’s broader digital asset agenda. The proposed changes aim to clarify existing frameworks and remove unnecessary burdens. This sets a potentially more favorable regulatory environment for the burgeoning crypto industry, where political developments often shape outcomes.
This isn’t the first time the SEC has tackled crypto custody. A prior attempt under former SEC Chair Gary Gensler in 2023 faced intense backlash and ultimately failed to gain final approval, being withdrawn in 2025. That proposal would have imposed strict requirements, largely limiting qualified custodians to traditional financial institutions like chartered banks or trust companies.
But the current initiative, spearheaded by Chairman Paul Atkins, arrives with a different tone. Since taking office in 2025, Atkins has consistently advocated for a more crypto-friendly regulatory approach, emphasizing rulemaking over enforcement. This custody proposal directly reflects that philosophy, aiming to ease compliance for investment advisers navigating the complexities of digital assets.
The contentious Gensler era proposal
The previous proposal, launched by former SEC Chair Gary Gensler, sought to significantly expand the scope of the agency’s custody regulations. Gensler had issued a stark warning, stating that “investment advisers cannot rely on [crypto platforms] as qualified custodians” given their operational structures. This hardline stance created considerable friction within the nascent digital asset sector.
That regulation would have compelled investment advisers to place client crypto assets with a narrow group of “qualified custodians,” primarily chartered banks, trust companies, or registered broker-dealers. Critics argued this approach failed to acknowledge the unique nature of digital assets and the evolving infrastructure supporting them. Many believed it would stifle innovation rather than promote investor protection.
Industry’s sharp reaction to the previous attempt
Investment firm a16z went further, publicly declaring the proposal “illegal, infeasible, and dangerous.” Such fierce opposition ultimately contributed to its demise, underscoring the need for a more nuanced and collaborative approach to crypto regulation. The current SEC leadership appears to have taken this lesson to heart.
Modernizing digital asset safeguards
The new “Amendments to the Custody Rules” are specifically designed to “improve and modernize the regulations around custody of investment adviser client assets and fund assets, including to address crypto assets.” This language suggests a focus on adapting existing rules to fit the digital age, rather than imposing entirely new, restrictive frameworks.
The SEC’s public regulatory agenda indicates the pending proposal will also “remove burdens from certain outdated provisions that are no longer needed to provide investor protection given the evolution in the markets and security trading and holding practices.” This acknowledgement of market evolution suggests a more pragmatic regulatory stance, aiming to facilitate growth while maintaining necessary safeguards.
Evolving landscape for qualified custodians
A crucial factor distinguishing this attempt from the last is the significant evolution within the crypto industry itself. Since the 2023 proposal, the sector has seen a surge in new federal trust bank charters. These charters allow a wider range of institutions to legally handle digital assets, broadening the pool of potential “qualified custodians.”
This expansion should make the SEC’s new rules more workable for investment advisers.
The current administration is keen to clarify the framework for the custody of crypto assets for both investment advisers and investment companies. This clarity is long overdue and could provide the institutional certainty many firms need to fully embrace digital asset offerings. Without clear guidance, many regulated entities have remained hesitant, limiting growth and investor access to this asset class.
Broader regulatory agenda under Chairman Atkins
The custody rule initiative isn’t an isolated event; it’s part of a comprehensive regulatory overhaul under Chairman Paul Atkins. His tenure has prioritized establishing clear guidelines for the digital asset space, shifting the agency’s previous enforcement-heavy approach towards proactive rulemaking. This strategy aims to bring regulatory certainty to a sector that has often operated in a legal grey area.
Just recently, the SEC also released its “Regulation Crypto Assets” proposed rule, marking the first major, crypto-specific regulation pitched by the agency. This signals a broader commitment to integrating digital assets into the existing financial regulatory structure. The finance sector is also eagerly awaiting the agency’s moves to clear the path for securities tokenization, a development Atkins has been promising for months.
Aligning with Trump administration’s digital asset agenda
This concerted effort aligns directly with President Donald Trump’s administration’s broader digital asset agenda. The White House has indicated a desire to foster innovation in the crypto space while ensuring robust investor protection. Sending the custody proposal to the OMB for review ensures the SEC’s regulatory efforts harmonize with the executive branch’s strategic priorities for the digital economy.
The SEC’s agenda also includes another near-term proposal focused on clarifying crypto compliance for broker-dealers. This multifaceted approach suggests a systematic effort to build a comprehensive regulatory framework for digital assets, addressing various aspects from custody to trading to tokenization. Investors might want to evaluate cryptocurrency projects carefully as these rules develop.
Industry hopes and forward outlook
The cryptocurrency industry is cautiously optimistic about the SEC’s renewed focus on clear and manageable custody rules. Many stakeholders view this as a positive step towards legitimizing digital assets within the mainstream financial system. Clear regulations could attract more institutional money, fostering greater stability and growth for the entire market.
However, the path to final approval isn’t always straightforward. While an October timeline is suggested for the custody proposal, SEC estimates can often be optimistic. For instance, the “Regulation Crypto Assets” rule was initially slated for April but wasn’t proposed until August. Sometimes, past predictions have been off by more than a year, with some proposals never seeing action.
The ultimate contours of the rule will heavily influence its reception and impact. The industry is watching closely to see if the final regulations truly remove burdens and foster innovation, or if they inadvertently create new obstacles. Clarity on how to evaluate cryptocurrency projects and their custodians will be key to market adoption.
The development of clear custody rules is also vital for the broader adoption of tokenized assets and other innovative blockchain-based financial products. With a more predictable regulatory environment, companies can invest more confidently in developing new services and products. This regulatory certainty is crucial for encouraging innovation and fostering the mainstream integration of digital assets.
Investors often follow various factors when assessing crypto market trends and potential impacts.