The development
The SEC proposed changes on October 1, 2026 addressing how registered investment advisers and regulated funds could hold crypto assets. The proposal would permit custody by the adviser or fund in certain circumstances, address state trust company custodians and amend audit requirements. The comment period runs for 60 days after publication in the Federal Register. These are proposed changes, not final rules.
Source: SEC crypto custody proposal announcement, October 1, 2026.
FOLITIC analysis
Custody is a set of responsibilities rather than the name of a storage product. Investors need to know who can authorize a transfer, how assets are separated from other property and what happens if access credentials are lost. A regulatory category does not by itself establish the quality of those controls.
Allowing additional custody arrangements could change operating costs and the range of services available. It could also shift responsibilities between a fund, an adviser and external specialists. The relevant comparison is the complete control framework, including independent checks and recovery procedures, rather than whether one model appears more technologically direct.
The proposal should not be interpreted as an endorsement of every asset that might be held under it. Permission to use a custody structure and an assessment of investment quality answer different questions. Market reactions can run ahead of implementation when headlines omit the distinction between consultation and a binding requirement.
What to watch
Monitor comments, any revised text and the final effective dates if a rule is adopted. For an existing investment product, rely on its current custody disclosures rather than assuming that proposed flexibility already applies. Any later regulatory change should be evaluated alongside the practical controls used by the provider.
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