Bitcoin News
The SEC’s 2026 custody pivot for digital assets
The SEC Shift
The SEC submitted a revised proposal to the White House in August 2026. Chair Paul Atkins leads this effort to modernize registration and recordkeeping rules for digital assets, banks, advisers, and brokers. This initiative follows the failed 2023 approach which featured tighter restrictions and limited crypto custody pathways. The SEC rescinded SAB 121. This decision removed accounting burdens that forced banks to recognize crypto assets as liabilities on their balance sheets. SAB 122 decoupled this approach for traditional financial firms. The current proposal aims to clarify the framework for the custody of crypto assets for investment advisers and investment companies. The SEC also issued guidance for the control of crypto asset securities in 2025. These rules aim to improve the commercial viability of Bitcoin custodianship for banks. The A-C-T framework focuses on advancing regulatory environments. The SEC aims to create a more accommodating environment for digital asset service providers.
Requirements and Models
State-chartered trust companies qualify as "banks" for custody purposes under the September 30, 2025 no-action letter. Verify these entities independently.
| Requirement | Detail |
|---|---|
| Financial Audits | GAAP-compliant audited financial statements |
| Internal Controls | Type II SOC report or equivalent |
| Policy Mandate | Written internal policies for asset safeguarding |
| State Authorization | Authorization by relevant State Banking Authority |
The SEC Division of Investment Management Staff issued the September 30, 2025 no-action letter to provide clarity for registered investment advisers and registered investment companies that seek to use state-chartered trust companies as qualified custodians for crypto assets. This guidance allows these firms to use state trust companies for crypto asset custody if the entities meet specific conditions. The company must implement written internal policies to safeguard assets against theft, loss, misuse, and misappropriation. The firm must also enter a written custodial services agreement that prohibits lending or rehypothecating assets without prior written consent. The firm must provide audited financial statements prepared in accordance with GAAP by an independent public accountant. The RIA or Registered Fund must also review the most recent written internal control report from an independent public accountant to confirm that controls meet control objectives. The RIA must also ensure the state trust company holds authorization from the relevant State Banking Authority.
Qualified custodians include federally regulated banks, registered broker-dealers, and futures commission merchants. Institutions select custody models based on security and regulatory obligations. Self-custody gives the institution control over private keys and puts the operational burden on the organization. Third-party custody shifts responsibilities to a custodian that secures keys and provides approval workflows. A hybrid model combines both approaches where the institution retains control over certain approvals while relying on a custodian for infrastructure. When evaluating a custodian, institutions assess operational controls, insurance, asset segregation, and audit standards. They must determine if client assets are held in individually designated accounts or pooled with other holdings. A custodian must maintain evidence that governance controls work.
Institutional Impact
The SEC’s shift toward a flexible framework opens the door for institutional Bitcoin adoption. Banks engage in crypto-asset-related activities more easily because the OCC and FDIC removed prior approval requirements. The SEC rule 15c3-3 mandates possession and control of customer securities, but Bitcoin typically falls outside these specific rules. BlackRock uses Coinbase Custody as the custodian for its iShares Bitcoin Trust ETF holdings. Coinbase, Inc. serves as the prime broker and maintains a bitcoin trading account for the Trust. The Federal Reserve withdrew its 2023 guidance that required sign-off before banks could engage in crypto-asset activities. In March 2025, the FDIC issued guidance letting FDIC-insured banks offer crypto custody without needing prior approval from regulators. Asset managers require secure assets, audits, and reporting to manage large investment funds. Tokenized bonds and funds also require secure custody infrastructure to enable market growth.
The regulatory transition remains messy.
Commissioner Caroline Crenshaw criticized the no-action letter, stating that it "degrades" the existing custody framework.
Banks and crypto-native firms like BitGo and Coinbase Custody now compete for the same pool of institutional business.
Will the SEC provide enough clarity to satisfy all investment committees?
