- A proposed rewrite of the US rules on who may hold client assets, covering investment advisers and investment companies, entered White House review on 25 August.
- That is the stage before a rule is formally proposed. A commissioners’ vote, a public comment period and a final vote all still come after it.
- It follows the withdrawal of a separate 2023 safeguarding proposal, so this is a fresh attempt rather than that plan coming back.
One line on a US government website is doing a lot of work in crypto headlines this week. The Securities and Exchange Commission has sent a rewrite of its custody rules into White House review. No text has been published, no commissioner has voted, and nothing has been proposed.
The reason so few regulated fund managers in the United States hold crypto directly is a rule about who is allowed to look after somebody else’s assets, written decades before crypto existed. If that rule is rewritten to fit, a large category of professionally managed money gets a route in. If it isn’t, that money stays where it is. This filing is the first visible step, and it is a long way from the last one.
What we actually know here
Very little, and it is worth being straight about that. We have not seen the SEC’s filing. The story was reported by The Defiant, which is a secondary source, and the underlying entry in the review system is a title, a date and a stage. There is no draft text in the public domain while a rule sits at this point in the process.
Nothing was said alongside it either. No statement from the agency, no named official on the record, nothing quotable from anyone involved. Which means the safest way to read this story is as confirmation that work exists, not as a description of what that work says.
The rule that makes crypto awkward for regulated managers
Start with the thing the coverage never explains, because everything else follows from it.
If you run money for other people in the US as a registered investment adviser, you are generally not allowed to simply keep their assets yourself. Rule 206(4)-2 under the Investment Advisers Act, usually just called the custody rule, says client assets have to sit with a qualified custodian. That term is defined, and the definition is a list: banks and savings associations, registered broker-dealers, futures commission merchants, and certain foreign financial institutions.
The design assumes a particular kind of asset. Shares, bonds and cash exist as entries on somebody’s books. A custodian holds the record, the adviser can instruct trades but cannot quietly walk off with the position, and an auditor can check the two sides against each other. The rule was built for a world of certificates in vaults and registrars keeping ledgers, and for that world it works well.
Why a private key breaks the design
Crypto ownership doesn’t work like that. There is no registrar. What you own is a , a very long secret number that proves the coins are yours and lets you move them. Whoever holds the key controls the asset, and that is the whole system. We go through this properly in our guide to self-custody.
So “holding” client crypto means holding keys, and the institutions on the qualified custodian list were mostly not built to do that. Some now offer it. Many do not, and those that do have spent years working out how it fits alongside everything else they are supervised on.
That produces a circular problem. Advisers can’t easily hold crypto because they need a qualified custodian. Fewer qualified custodians offer crypto because the demand is constrained by the same rule. It has been a quiet but effective brake on professional money entering the asset class, and it operates well below the level of the approvals that get all the attention.
The 2023 proposal, and why it was pulled
The SEC did try to address this once. In February 2023 it proposed a “safeguarding” rule that would have widened the custody rule to cover essentially all client assets rather than just funds and securities, crypto included, while tightening what custodians had to do: written agreements, segregation, and assurances about who could move what.
The response from the industry was that the proposal would make crypto custody harder rather than easier, because the number of institutions able to meet the conditions for a digital asset was small and the rule gave them little reason to grow. The proposal never became a rule. The agency formally withdrew it in 2025, alongside a batch of other pending proposals it decided not to pursue, which left the original custody rule standing untouched.
The rewrite now in review is reported to be a separate exercise. That distinction matters: this is not the 2023 plan returning with edits, and objections raised then do not automatically apply to whatever is in the new draft.
What “White House review” is, and what it is not
Before certain rules are published, they go to the Office of Information and Regulatory Affairs, a unit inside the White House’s Office of Management and Budget, which checks them against the administration’s broader requirements. Independent agencies like the SEC historically sat outside that process. An executive order signed in February 2025 brought them into it.
Review normally runs up to 90 days, with extensions possible. After that, if the rule clears, the SEC’s commissioners have to vote to propose it. Then it is published for public comment, usually for 30 to 90 days. Then staff work through the comments, the text often changes, and the commission has to vote again to adopt a final version. Compliance dates typically come a year or more after that.
So entering review is not a rule, not a vote, not a deadline and not a decision. It is the earliest stage at which an outsider can tell that something is being written at all.
What a rewrite could and couldn’t change
Within its own limits, quite a lot. It could widen who counts as a qualified custodian to include state-chartered trust companies or purpose-built digital asset custodians. It could set explicit conditions for crypto: how keys are generated and split, what segregation means when assets share a address, what evidence of exclusive control an auditor should expect. It could deal with the messy situations where assets have to leave custody temporarily, which is what staking and lending both require.
What it cannot do is force any bank to offer the service, change how assets are taxed, or settle the separate questions about which are securities in the first place. A final rule can also be challenged in court, and a later commission can revisit it. Rules are durable, but they are not permanent.
The question the filing leaves open
Here is our inference rather than a reported fact, and it is worth labelling as such. The public entry gives no indication whether the draft contemplates an adviser holding keys itself, under conditions, or whether third-party custody remains mandatory in all cases.
That single choice decides who the rewrite is for. A framework that allows supervised with multi-signature controls and independent verification is one that crypto-native managers can work within. A framework that keeps the third-party requirement absolute routes everything through a short list of large institutions, which is a different market with different costs. Nothing published so far tells you which way it goes.
What it means from the UK
Nothing directly, and any coverage suggesting otherwise is overreaching. The custody rule governs US-registered advisers and funds, not British ones.
The UK is approaching the same problem from the opposite direction. Crypto firms here have been registered with the FCA for anti-money-laundering supervision rather than conduct, but HM Treasury published draft legislation in 2025 that would make safeguarding qualifying cryptoassets a regulated activity in its own right, with the FCA consulting on how those rules should work alongside the existing client assets regime. Britain is writing custody rules for crypto more or less from a blank page. The US is retrofitting one written in the 1940s.
The indirect effect is the one to hold on to. What American advisers and funds are permitted to hold shapes which products get built, and those products are a meaningful share of demand for the larger assets, bitcoin and ethereum in particular. If you hold coins yourself, none of this changes your own arrangements. It changes who else can turn up in the same market.
What to watch
The first real information will be the proposal text, which only becomes public after review concludes and the commissioners vote. Until then there is nothing to analyse.
When it does appear, two things tell you most. Whether the definition of qualified custodian is widened or kept tight, and whether the parallel rules for investment companies move at the same time or are left behind. And keep an eye on the length of the comment period: a short one signals an agency that wants this finished, a long one signals an agency expecting an argument. Our ongoing policy coverage will pick it up when the text lands.