SEC Submits Crypto Custody Rule Proposal to White House for Review
The agency aims to move from enforcement-led oversight toward formal rulemaking for investment advisers and companies holding digital assets.
On August 25, 2026, the Securities and Exchange Commission (SEC) submitted a proposal titled “Amendments to the Custody Rules” to the White House for review. The submission is currently being processed by the Office of Information and Regulatory Affairs (OIRA), which is part of the White House Office of Management and Budget. According to Cointelegraph, this regulatory move seeks to provide institutions with clearer guidelines on how they can hold crypto assets for clients while remaining in compliance with federal securities regulations.
Scope and Rulemaking Process
The proposal targets changes to existing rules under both the Investment Advisers Act and the Investment Company Act. According to Bitcoin Magazine, the objective is to “clarify the framework for the custody of crypto assets” and modernize current regulations by removing outdated provisions that are no longer necessary for investor protection given the evolution of market practices and security trading.
The proposal has not yet been released for public comment. It must first undergo review by OIRA, which coordinates the Executive Branch’s evaluation of economically significant draft regulations before an agency can publish them. According to CryptoSlate, once OIRA completes its review, the proposal returns to the SEC, where the commission will vote on whether to release it for public feedback. While the Unified Agenda lists October 2026 as a planning target for a notice of proposed rulemaking, CryptoSlate reports that there is currently no legal deadline for completion.
Transition from Enforcement to Rulemaking
The submission reflects a broader shift in the SEC’s approach toward digital assets under the leadership of Chair Paul Atkins. According to Cointelegraph, since Atkins took office in 2025, the agency has moved away from “regulation through enforcement” and toward formal rulemaking. This change was underscored by the dismissal of several cases against major crypto firms in 2025, including a lawsuit against Coinbase.
This new proposal also marks a departure from previous efforts; according to CryptoSlate, the SEC withdrew its 2023 safeguarding proposal in June 2025 and stated that future actions would require a new proposal rather than reviving the requirements of the withdrawn draft.
Impact on Financial Institutions
The proposed rules will have direct consequences for registered investment advisers, funds, banks, and state trust companies involved in handling crypto assets. Currently, these entities rely on a practical baseline established by a September 30, 2025, staff position from SEC investment-management officials. According to CryptoSlate, this “no-action letter” indicates that the staff would not recommend enforcement against advisers or funds using state trust companies as banks for crypto custody if specific conditions are met.
The current baseline requires several safeguards, including:
- Authorization and safeguarding policies
- Audited financial statements
- Independent control reports
- Custody contracts
- Risk disclosures
- Best-interest determinations
Additionally, the custody agreement must segregate client or fund assets and prohibit lending, pledging, or rehypothecation without prior written consent. The new proposal submitted to the White House aims to move these practical standards into a formal regulatory framework.
Legislative Context
The SEC’s rulemaking occurs alongside ongoing legislative efforts to establish market structures for digital assets. Pro-crypto lawmakers attempted to pass the Clarity Act before the August recess, but the vote was delayed until September due to opposition from Democrats. According to Bitcoin Magazine, Republican Senator Cynthia Lummis has accused some lawmakers of deliberately stalling the bill.
Despite these legislative delays, other regulators are moving forward with their own mandates. CFTC Chairman Michael Selig stated he will proceed with rulemaking regardless of whether the Clarity Act is enacted, with the goal of finalizing rules before the current administration’s term concludes. Meanwhile, SEC Chair Paul Atkins has expressed his commitment to supporting Congress in advancing the Clarity Act.