The Securities and Exchange Commission is preparing a crypto custody rule overhaul for investment advisers and funds, according to a Wu Blockchain report on Bloomberg’s coverage. The agency has moved a new proposal to the White House Office of Management and Budget, a regulatory step that often precedes a formal rulemaking or reopening of an earlier proposal.
What the Proposed Custody Overhaul Would Change
The expected revision would update how SEC-registered advisers and investment funds must safeguard client crypto assets. The original custody framework has drawn industry criticism over its scope, and the new version is likely to clarify which digital assets and custodial arrangements fall under the rules. That fits a broader pattern of SEC policy adjustments, including the SEC Again Delays Tokenization Innovation Exemption as Wall Street and White House Raise Concerns.
Because the proposal has been submitted to the White House budget office, it may be a revised version of the 2023 custody rule rather than an entirely new draft. Advisers and funds currently face questions about qualified custodian requirements, proof of reserves, and separation of client assets. The SEC’s move signals that it wants those obligations aligned with the current crypto market structure, as reflected in the broader regulatory agenda described in SEC Chairman: U.S. Entering Historic Era of Crypto Regulatory Reform.
The submission to the Office of Management and Budget is not final approval, but it is a concrete procedural signal that the SEC is preparing a formal action. If the White House clears the rule, the commission could then publish it for public comment or adopt a final version. This comes as market participants are also pushing for new frameworks on adjacent products, such as the Hyperliquid Policy Center and trade[XYZ] Urge SEC to Establish Pre-IPO Perpetuals Framework.
What to Watch as the SEC Moves Toward Final Approval
For investment advisers and funds, the critical variables will be the final definition of qualified custodian, the treatment of non-custodial or self-hosted assets, and any timeline for compliance. A more prescriptive rule could raise operational costs for firms that manage client crypto exposures, while a narrower standard may leave some digital asset arrangements outside the SEC’s direct custody regime. Market participants should also watch whether the proposal reopens earlier debates about crypto asset classification and whether the SEC coordinates with banking regulators on custodial standards.
The next milestone is likely White House budget office sign-off, followed by publication of the rule text in the Federal Register. Because the proposal is still in the regulatory pipeline, no immediate compliance deadline has been announced. Still, advisers and funds should begin reviewing their custody arrangements as the SEC’s formal position takes shape.
