The Securities and Exchange Commission forwarded a proposed rulemaking on amendments to its custody rules to the White House Office of Management and Budget on August 25. The initiative aims to clarify how registered investment advisers and investment companies may hold crypto assets for clients while complying with existing federal requirements.

According to the agency’s regulatory agenda entry, the rulemaking would establish a clearer framework for the custody of crypto assets. It would also update other provisions that the Commission views as outdated in light of changes in financial markets and current practices for trading and holding securities.

Scope of the Proposed Changes

The amendments would apply under both the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Investment advisers and companies have raised questions about applying traditional custody standards—originally designed for conventional securities—to digital assets whose ownership often depends on private keys and blockchain systems.

Under current rules, advisers with custody of client funds or securities generally must place those assets with a qualified custodian, such as a bank or broker-dealer, unless an exception applies. Limited support for crypto among traditional custodians has created practical difficulties for firms seeking to offer digital asset exposure.

The Office of Management and Budget has classified the proposal as economically significant, indicating a potential annual economic impact of at least $100 million. It is also designated as deregulatory under an executive order directing agencies to reduce regulatory burdens. Specific details of the text remain unavailable until the White House review concludes.

Path Forward After Review

Once the Office of Management and Budget completes its examination, the proposal may return to the SEC with possible revisions. The Commission’s members would then vote on whether to publish the rule for public comment. A minimum 60-day comment period would typically follow, after which the agency could finalize and adopt the changes.

The SEC’s regulatory agenda targets October for formal publication of a proposal. Industry participants, including advisers, crypto firms, and other stakeholders, would have the opportunity to submit feedback during the comment stage.

Context of Broader Regulatory Shifts

The custody initiative forms part of a wider set of digital asset rulemakings advanced under SEC Chair Paul Atkins. In recent months the Commission has placed multiple crypto-related projects on its agenda, covering asset classification, broker-dealer treatment, and market structure. It has also introduced a proposed framework for certain crypto investment contracts that would create exemptions for token fundraising, including limits of up to $5 million for smaller offerings and $75 million over 12-month periods for qualifying issuers.

These steps occur while Congress continues work on the Digital Asset Market Clarity Act. The House passed its version of the legislation in 2025, but Senate action has faced delays, with a potential procedural vote discussed for mid-September. Proponents of the bill had sought passage before the August congressional recess, yet negotiations extended into the fall.

SEC leadership has indicated that the agency intends to proceed with rulemaking within its existing statutory authority even if legislative progress remains slow. The custody proposal addresses issues that fall squarely under the Commission’s jurisdiction over investment advisers and investment companies, allowing it to advance independently of broader market-structure legislation.

The current effort differs from an earlier safeguarding proposal introduced in 2023 that would have expanded custody obligations. That earlier rule was withdrawn in June 2025. The present approach signals an intent to ease certain requirements rather than broaden them, consistent with the deregulatory classification assigned by the White House.

Investment advisers and firms that manage client portfolios containing digital assets have long sought greater certainty on acceptable custody arrangements. The forthcoming proposal is expected to address those operational questions while updating rules written before crypto assets became part of regulated investment products.