Over $100 trillion in U.S. assets under management is set to enter a new custodial framework specifically designed for crypto assets.

On October 1, the U.S. Securities and Exchange Commission (SEC) officially proposed a new set of crypto-asset custody rules. The plan is to create a clearer path for crypto-compliant custody for registered investment advisers (Registered Investment Advisers, RIAs) and regulated funds, and to allow advisers and funds to self-custody crypto assets in certain circumstances.

The potential impact of this reform is substantial.

According to the SEC’s latest statistics, in 2025 the regulatory assets under management (RAUM) reported by investment advisers reached approximately $177 trillion, up 21% from the prior year. In other words, the scope of this new rule touches one of the largest asset management markets in the world.

The SEC has currently only formally proposed a draft rule, not yet fully allowing funds to hold Bitcoin themselves. In practice, self-custody would only be available under certain conditions, and the final rule could still be modified after public consultation.

$177 trillion asset management industry first receives a clear crypto custody framework

SEC Chair Paul Atkins said that since Bitcoin was born in 2008, the crypto asset market has developed from a niche asset into one with a scale of several trillion dollars, but the existing U.S. custody rules are still mainly built on the traditional securities market framework and have not kept up with the development of digital assets.

Therefore, one of the core purposes of the SEC’s new rules this time is to establish a custody framework specifically applicable to crypto assets for investment advisers, registered investment companies, and business development companies (BDCs). Atkins is even more direct: the new rules will provide a "compliant pathway" that investment advisers and funds previously did not have.

This sentence is very important. Because one of the biggest problems Wall Street has faced with Crypto in the past wasn’t just whether it is possible to invest—it was, if you truly hold on-chain assets directly, then who will have custody of the private keys?

Biggest breakthrough: In certain circumstances, funds and investment advisers are allowed to self-custody Crypto

The part of the new rules that has attracted the most market attention is that the SEC has formally proposed a "self-custody" mechanism. Currently, investment advisers typically must have customer assets held by a qualified custodian, such as a bank, broker-dealer, or other qualified financial institution.

But the Crypto market has a special problem: some newly issued tokens or on-chain assets may simply have no qualified custodian willing, or able, to provide custody services.

In explaining the new rules, SEC Commissioner Hester Peirce noted that the current framework has put many investment advisers in a dilemma of "no clear rules and no feasible custodian." The new proposal therefore allows that when no appropriate qualified or permitted custodian is available, investment advisers or funds may, under certain conditions, custody the relevant crypto assets themselves.

This means that regulated asset management entities in the future may not have to give up certain on-chain investment opportunities entirely simply because there is "no qualified custodian in the market."

However, "self-custody" is easy to misunderstand. The self-custody the SEC refers to does not mean that a fund manager can just put customers’ Bitcoin in after grabbing a Ledger or a cold wallet. In practice, the responsibility for custody of the crypto assets is borne legally by the investment adviser or the fund itself. Institutions still must meet additional requirements for cybersecurity, internal controls, reporting, and asset protection.

Peirce also pointed out that before investment advisers adopt self-custody, they need to first determine that there is no other suitable allowed custodian in the market, and then they must continue to reassess afterward. The new rules are not a "complete removal" of custody restrictions; instead, they add a limited self-custody exit route beyond the existing third-party custody framework.

Why is Bitcoin getting special attention?

Bitcoin is currently the most widely held crypto asset by institutions, so any SEC custody framework reform is likely to be interpreted by the market as lowering the threshold for Wall Street to hold BTC directly.

But legally, the distinction still needs to be made. The SEC’s new rules this time mainly address how investment advisers and regulated funds would custody "crypto assets." Whether the relevant custody requirements fall under (Investment Advisers Act) and (Investment Company Act) depending on the different assets is still related to their legal classifications and the fund structure.

The SEC is lowering institutional barriers for regulated investment entities to directly hold Crypto, and Bitcoin is likely to be one of the most market-attended beneficiary assets.

Another important change in this proposal is expanding the choice of third-party crypto asset custodians. The SEC plans to allow eligible state-chartered trust companies (state-chartered trust companies) to serve as crypto asset custodians. This means that in the future, the crypto custody market may no longer rely only on large banks or broker-dealers, and there may be opportunities for more regulated trust institutions that specialize in handling digital assets to enter the market.

For Wall Street, this may be even more important than simply "allowing self-custody." Because for large asset management firms, the truly ideal model often isn’t to be responsible for all private keys themselves, but to have more regulated and technically capable professional Crypto custody providers to choose from.

From ETFs to holding coins directly, Wall Street is running into the next threshold

In the past few years, the most obvious breakthrough for institutions entering the Bitcoin market has been spot Bitcoin ETFs. ETFs solve one problem: investors can get Bitcoin price exposure through traditional brokerage accounts, without needing to manage wallets and private keys themselves.

But for fund managers and investment advisers, ETFs cannot solve all needs. Some investment strategies may require direct holdings of Bitcoin, Ethereum, staked assets, and on-chain tokens, or even participation in decentralized finance (DeFi) or other native on-chain operations. At that point, what blocks Wall Street is no longer whether it can "buy," but rather how it can legally custody what it buys. The SEC’s new rules are addressing this second-stage problem.

The SEC-statistics figure of $177 trillion is the total regulatory assets under management of all reporting investment advisers, covering equities, bonds, funds, private assets, and other investment vehicles. The asset management industry managing these $177 trillion may in the future have a clearer and more workable crypto asset custody framework. As long as the institutional barriers are reduced, even allocating only a very small percentage of assets to Crypto could have substantial potential significance for a crypto market that is still only at the scale of several tens of billions of dollars.

However, self-custody also means increased responsibility. In the traditional model, a fund hands assets to a third-party custodian, with custody and investment management being two separate roles. But if the investment adviser keeps the Crypto itself, then the investment decision-maker also becomes the asset custodian. This increases risks related to network security, private key management, internal personnel permissions, asset misappropriation, and operational risk.

Better Markets, an investor protection organization, criticized that the SEC’s new proposal could weaken the separation between investment management and asset custody, thereby increasing the risk that client assets could be harmed due to loss, theft, or misuse. Supporters of the new rules argue that if self-custody were completely prohibited, and there are no qualified third-party custody providers, the practical effect would be directly banning funds from investing in part of on-chain assets.

"SEC opens the door to Crypto custody for the $100+ billion asset management industry! Investment advisers and funds self-custodying Bitcoin may see loosened restrictions" was first published on (BlockBeats).