SEC Custody Rewrite Hits White House Review — Big Questions Still Unanswered
Good news for rule-watchers and policy nerds: the Securities and Exchange Commission’s rewrite of custody rules that would cover advisers, funds, and their crypto holdings entered a White House review on Aug. 25. Translation: the proposal has begun the official pre-publication checkup, which means it’s moved from backstage whispers to center stage — but the script is still mostly blank.
Where this rulemaking actually stands
The Office of Information and Regulatory Affairs has the draft on its desk, which triggers the formal interagency review process. That doesn’t lock in any deadlines — it just means the government is vetting the draft before the SEC can publish a proposed rule. The agency’s planning calendar currently lists October 2026 as the target for a notice of proposed rulemaking, but that’s a roadmap date, not a firm deadline.
Crucially, the public records so far don’t include the actual regulatory text. In plain English: we know the SEC is thinking about changing custody rules that touch investment advisers, funds, and crypto assets, but we don’t yet know the specific eligibility criteria, controls, or safeguards the agency will propose.
Why advisers, banks and state trust companies are on edge
Registered investment advisers and funds are the ones most directly affected, since their custody setups depend on third parties that meet federal standards. That pulls banks, state trust companies, and other custodians into the picture — and into the potential commercial impact of the final rule.
Background matters. The SEC pulled its 2023 safeguarding proposal in June 2025 and said any new approach would start from scratch, so this draft is a fresh rulemaking rather than a resurrection of earlier text. Meanwhile, SEC staff issued a practical enforcement signal last fall: on Sept. 30, 2025 they said they wouldn’t recommend enforcement against advisers or regulated funds that treated certain state trust companies like banks for crypto custody, provided those custodians and arrangements met a long list of conditions.
Those guardrails — summarized here — include formal authorization from the custodian, written policies to protect client assets, audited financial statements, independent control reports, written custody agreements, clear risk disclosures, and a documented determination that the arrangement is in clients’ or shareholders’ best interests. Custody contracts must keep client or fund assets separate and prohibit lending, pledging, or rehypothecation without prior written consent. Advisers and funds must also disclose material risks and affirm the custodian serves their best interests.
That staff no-action stance doesn’t create binding law, but it’s been the real-world operating baseline for market participants. Turning this informal signal into a formal rule will kick off the hard debate: who can legally custody crypto, and what protections must they provide? Expect a lengthy, lively back-and-forth when the SEC publishes its proposal — because when it comes to crypto custody, the devil’s in the details, and detail is what we don’t have… yet.
