SEC Submits New Crypto Custody Proposal to White House for Review

The U.S. Securities and Exchange Commission submitted a new proposal to the White House Office of Management and Budget (OMB) on August 25, 2026, to regulate how investment advisers safeguard crypto assets. The move signals a renewed effort to establish a legal framework for digital asset custody.

Under the leadership of Chair Paul Atkins, the SEC is attempting to resolve a long-standing regulatory gap regarding "qualified custodians." This initiative follows a shift toward a more permissive regulatory stance, which includes the agency's recent proposal of "Regulation Crypto Assets" to create a tailored offering regime specifically for digital assets.

A Shift in Regulatory Strategy

This effort follows a failed 2023 attempt under former Chair Gary Gensler. That previous proposal would have effectively barred investment advisers from using most crypto platforms as qualified custodians, instead requiring the use of chartered banks or trust companies. During that period, Gensler stated that investment advisers could not rely on general crypto platforms as qualified custodians based on how those platforms typically operate.

The Gensler-era proposal faced significant backlash from industry players and the Small Business Administration, leading the SEC to eventually withdraw the rule. Since that withdrawal, the landscape has evolved, with an increasing number of institutions obtaining federal trust bank charters to meet stringent safeguarding requirements.

Implications for Institutional Adoption

Establishing clear custody rules is widely viewed as a critical prerequisite for the broad institutional adoption of crypto assets in the United States. By modernizing the requirements for qualified custodians and removing outdated regulatory burdens, the SEC aims to provide the legal certainty necessary for investment advisers to manage client assets.

Without a clear rule, advisers face a precarious environment where they must balance the demand for digital asset exposure against the risk of regulatory sanctions or operational infeasibility. A finalized, industry-friendly rule would allow firms to scale their crypto offerings with a verified compliance roadmap.

Next Steps for the Agency

The proposal now awaits the preliminary review of the OMB before it can move toward a formal rulemaking process. While the submission marks a concrete step forward, the exact timeline for a final rule remains unconfirmed.

Market participants are now watching to see if the Atkins-led SEC can successfully navigate the administrative process and deliver a framework that satisfies both the agency's mandate for investor protection and the industry's need for operational flexibility.