SEC Updates Crypto Custody Rules for Advisers
Investors with managed crypto holdings now have clearer protections as the SEC allows state-supervised firms to act as custodians.
Updated on Oct. 28, 2026 in Investing
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On September 30, 2025, the SEC Division of Investment Management issued a no-action letter permitting certain state-supervised trust companies to serve as custodians for crypto assets. This regulatory shift allows investment advisers and registered investment companies to treat these entities as banks, provided they meet specific safeguarding and fiduciary requirements.
Why it matters
This guidance clarifies how investment advisers can hold crypto assets for clients by expanding the pool of authorized custodians. It balances access to emerging digital assets with established standards for asset protection and segregation under the Investment Advisers Act of 1940.
Regulatory relief is governed by standards under Section 206(4) of the Investment Advisers Act and Sections 17(f) and 26(a) of the Investment Company Act. Advisers must now verify that state-supervised trust companies satisfy these federal safeguarding expectations before utilizing them.
The players
SEC Division of Investment Management
The agency arm that oversees investment advisers and funds to ensure they adhere to federal protection standards.
The details
To utilize this custody option, investment advisers must perform a due inquiry to confirm that a state trust company has sufficient policies for safeguarding crypto assets. Written agreements are mandatory, specifically prohibiting the lending, pledging, or hypothecating of client assets. Advisers are also required to document that using a specific trust company for crypto custody is in the client's best interest.
Timeline
September 30, 2025: The SEC Division of Investment Management issued the no-action letter regarding crypto asset custody.
Money Landscape
This development marks a formal integration of crypto assets into the traditional regulatory framework governed by the Investment Advisers Act of 1940. It provides a clearer pathway for professional management of digital assets within the existing investor protection regime.
If you hold crypto through a registered investment adviser, ask how your firm safeguards those assets and whether they utilize a qualified custodian. Ensure you understand if your advisory agreement includes specific prohibitions against lending or pledging your digital assets.
The takeaway
This SEC guidance formalizes how your professional investment adviser can safely hold crypto assets on your behalf. Review your current advisory contract to confirm that your manager maintains clear, written custody policies regarding asset segregation and unauthorized usage.
Further reading
Learn more about professional wealth management standards in our Investing section.
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Do you trust state-regulated trust companies to securely manage and protect your digital assets?
