Quick Read
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The SEC’s proposed custody rule could unlock access to over $100 trillion in managed adviser funds for Bitcoin and crypto markets.
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US spot Bitcoin ETFs already hold $108 billion, which is six times Ethereum’s $17.8 billion, signaling where adviser money flows first.
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Self-custody is permitted only when no approved custodian exists, requiring dual authorization and audits that make it prohibitively costly for most advisers.
The SEC has introduced a proposed crypto custody rule that may allow registered investment advisers to directly hold Bitcoin (CRYPTO:BTC) and other cryptocurrencies for their clients. Given that these advisers manage over $100 trillion, even a small shift toward crypto could channel significant funds into the market.
Until now, most investment advisers have refrained from buying Bitcoin in managed accounts because of strict custody regulations. The existing rules required the use of a qualified custodian without clearly defining who could hold a private key. If the new proposal is finalized, it raises an important question: which cryptocurrencies will see the first influx of adviser money?
The SEC’s Crypto Custody Rule Adds New Custodians for Advisers
Investment advisers responsible for client assets must typically engage a qualified custodian—a regulated bank or broker responsible for safeguarding those assets. These standards were designed for traditional investments like stock certificates, but the unique nature of cryptocurrencies, which are controlled by private keys, complicates matters. In fact, the SEC withdrew a 2023 proposal on custodial safeguards on June 12, 2025, leaving a gap until now.
The new proposal updates the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Under this plan, state trust companies could serve as custodians if they implement written safeguarding policies and submit annual audited financial statements. Registered broker-dealers could also qualify based on customer protection standards. Additionally, regulated funds might expand their crypto offerings, and under certain conditions, airdropped coins could stay within the new rules.
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