Three Key Insights

  • The SEC crypto custody proposal would require separate addresses for each client’s assets held by an adviser.
  • Advisers would need quarterly checks that no qualified custodian will maintain the asset.
  • The proposal remains open to public comment; it does not change custody rules immediately.

The SEC crypto custody proposal, issued Oct. 1, would tie adviser self-custody to client-level asset segregation. Each client’s crypto would occupy addresses containing only that client’s assets.

The Securities and Exchange Commission’s announcement emphasized broader custody options for investment advisers and regulated funds. The detailed conditions explain how narrowly the proposed self-custody route would operate.

SEC crypto custody proposal separates client assets

The proposed rule text would require one or more separate addresses for each client. Combining different clients’ assets in a shared address would fall outside that condition.

The SEC’s rationale is transparency: clients could monitor activity at addresses holding their assets. Separation would make an adviser’s use of those assets easier to trace.

Address segregation and control over transfers are different questions. These would remain assets held by an adviser, even when clients could inspect their blockchain records.

Self-custody depends on the absence of a custodian

Before taking custody, advisers would need a written determination that no qualified custodian will maintain the asset. They would repeat that assessment at least quarterly. Once a custodian becomes available, they would transfer the asset as soon as reasonably practicable.

SEC Chairman Paul Atkins said custodial capabilities could lag newly deployed assets by months. That explains the proposal’s focus on a gap in available services.

The framework would also require joint transfer authorization by at least two designated people, including a management person. An independent accountant’s internal-control report would be due within six months, then at least once each calendar year.

What happens before the proposal becomes a rule?

The package would also permit state trust companies to custody client and regulated-fund crypto under specified conditions. These are proposed institutional custody arrangements. For another jurisdiction’s approach, see Fusion Market News’s coverage of Brazil’s self-custody wallet requirements.

The public comment period will run for 60 days after Federal Register publication. That publication date, rather than the Oct. 1 announcement, starts the deadline. The next procedural milestone is publication of the proposing release in the Federal Register.

Sharron Kendi is a seasoned crypto market analyst and writer with over three years of experience decoding blockchain trends, price movements, and market dynamics. She holds a Bachelor’s Degree in Commerce (Finance) from Kenyatta University, blending a solid academic foundation with a sharp eye for technical analysis and a deep understanding of on-chain data. Her work delivers clear, data-driven insights that empower investors to navigate the fast-evolving digital asset space with confidence.