The SEC would let advisers hold client crypto keys, as 'Crypto Mom' Peirce bows out

What the SEC proposed

On October 1, 2026, the SEC proposed rules that would let investment advisers and regulated funds, such as mutual funds, hold crypto for clients, and in some cases keep the keys themselves. The same day, it announced that Commissioner Hester Peirce, who led its Crypto Task Force, is leaving.

The proposal would create a crypto-specific custody framework, allow some self-custody by advisers, and let state trust companies serve as custodians, the SEC said.

Chairman Paul Atkins said it would give advisers and funds "a compliant pathway where none existed before." In his statement he argued the current rules were written for traditional assets, and that custodians' ability to support new tokens can lag their launch by many months, according to the statement.

How adviser custody would work

Self-custody here means the adviser holding the client's private keys. It would only be a fallback. According to the SEC's fact sheet, the conditions include:

• A written finding, before self-custody starts and at least quarterly after that, that no permitted custodian is available for the asset.
• Documented expertise in safeguarding each asset, and systems for private key management that require at least two people to authorize any transaction. Those systems must be reviewed at least once a year.
• Each client's assets must sit at blockchain addresses that store only that client's crypto.
• Steps to reduce cyber risk, with cybersecurity controls reviewed at least yearly.
• An internal control report from an independent public accountant within six months of starting self-custody, then every year.
• Account statements to affected clients at least quarterly, and a written agreement to treat the crypto as a "financial asset" for extra protection under state law.

For regulated funds, the fund's board would have to review the adviser's report on why no qualified custodian is available, at the start and every quarter. It would also have to decide, before self-custody and yearly after that, that the asset would get reasonable care with the adviser.

Why advisers were stuck, and the trust company route

The SEC's custody rules require advisers to keep client assets with a "qualified custodian," usually a bank or broker. Commissioner Mark Uyeda wrote that the agency's February 2023 proposal left advisers with no workable path to hold crypto, and that a 2022 staff accounting bulletin, SAB 121, discouraged companies from safeguarding crypto at all, his statement said. He also pointed out that paper-era safeguards have limits, recalling that about 1.7 million paper certificates were destroyed or damaged at a custodian during Hurricane Sandy in 2012.

The new plan opens a second door through state trust companies. Under the fact sheet, an adviser or fund would need a reasonable basis, after due inquiry, to believe the trust company is authorized by its state banking regulator to hold crypto. The company must have written policies to protect crypto and related cash from theft, loss and misuse. The adviser must review its latest audited financial statements and internal control report, and client crypto must be kept apart from the company's own assets. For regulated funds, these conditions sit in a proposed new Rule 17f-8.

The proposing release also covers edge cases. Receiving airdropped tokens would not break the custody rules if the adviser or fund meets set conditions. Records kept on a blockchain could satisfy existing recordkeeping rules, as long as they can be given to the SEC promptly in a readable format.

Other custody changes

The proposal also updates general custody rules. According to the fact sheet, it extends deadlines for delivering audited financial statements for funds of funds and changes the timing for pooled vehicles formed late in their fiscal year. Audited statements would have to follow US accounting standards, with an exception for foreign pooled vehicles. It updates rules on broker-dealer custody for regulated funds and removes barriers to crypto-related investment advice and a wider range of crypto strategies for funds.

The release numbers are IA-7023 and IC-36353. Comments are due 60 days after publication in the Federal Register.

What the commissioners said

Commissioner Hester Peirce titled her statement "Roller Coaster Ride." She welcomed the wider set of custody options and the role for state trust companies, and criticized the SEC's 2023 proposal, which she said made compliant crypto custody look nearly impossible. She objected to calling adviser custody "self-custody," because true self-custody means investors holding their own keys. She joked that she would have preferred "shelf-custody". She hopes "the regulatory roller coaster will soon end in workable custody rules."

Uyeda backed the plan and wrote that rules "unworkable in practice will not protect investors," and only offer the illusion of protection.

Peirce's departure

Also on October 1, Atkins and Uyeda issued a statement on Peirce's departure. She served on the SEC staff from 2000 to 2008 and as a commissioner from 2018. They credited her with leading the Crypto Task Force and challenging what critics called regulation by enforcement, often standing alone on the Commission. They wrote that her "dedication, intellect, and humor will be sorely missed." The statement did not give her exact last day.

What's next

• Federal Register publication and the 60-day comment deadline
• Who is nominated to fill Peirce's seat
• Comments from state trust companies and large custodians