SEC Submits Crypto Custody Rule Revamp to OMB for White House Review

The Securities and Exchange Commission has pushed a sweeping rewrite of its crypto custody framework into the White House review pipeline, a key step in a rulemaking effort that could redefine how investment advisers and funds hold digital assets. On Aug. 25, the SEC sent a proposed overhaul of custody rules for registered investment advisers and investment companies to the Office of Management and Budget (OMB). The submission triggers the required executive review before the agency can publish the proposal and move it to a commission vote. The text and detailed provisions remain nonpublic while OMB evaluates the package. After OMB completes its review—potentially returning the proposal with edits—the SEC’s three Republican commissioners would vote on whether to release it for public comment. The forthcoming proposal is expected to clarify how advisers and funds can custody crypto assets while meeting existing obligations under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. The SEC is also aiming to address gaps created by rules written before crypto became embedded in products and portfolios, including custody models where ownership and control depend on private keys and blockchain-based systems. The amendments could also remove legacy custody requirements the agency now views as outdated amid modern asset-holding practices. The item is listed as "economically significant" on the federal regulatory agenda, signaling the SEC will assess anticipated costs, benefits, and broader economic effects as it develops the rule. For the industry, the proposal could provide clearer direction on which custodians and custody arrangements satisfy SEC requirements—a pivotal issue for crypto custody firms and the advisers and funds that rely on them. The SEC is starting fresh under Chair Paul Atkins rather than reviving the prior custody initiative advanced during former Chair Gary Gensler’s tenure. In March 2023, the SEC proposed the Safeguarding Advisory Client Assets rule, which would have expanded custody obligations to a broader set of client assets, including crypto, and generally pushed advisers toward using qualified custodians. The SEC withdrew that draft in June 2025 after industry feedback argued that many crypto custody providers would not meet the proposal’s "qualified custodian" definition. The new custody amendments are framed as a separate rulemaking, and key questions around qualified custodians, acceptable custody structures, and how the SEC will treat different crypto assets will not be answered until the proposal is published. The custody effort is part of a broader set of crypto-focused rulemakings the SEC has placed on a formal track under Atkins. In July, the agency added three crypto-related proposals to its 2026 regulatory agenda, covering exemptions and safe harbors for crypto assets; how broker-dealer rules apply to firms that handle digital assets; and market-structure rules for trading crypto on alternative trading systems and exchanges. The regulatory push comes as Congress continues work on the Digital Asset Market Clarity Act. The House passed its version, the CLARITY Act, in 2025. Senate discussions in 2026 have centered on how to split oversight between the SEC and the Commodity Futures Trading Commission (CFTC). Atkins has said the SEC will keep acting within its existing statutory authority even as lawmakers debate areas that require legislation. Next steps hinge on OMB completing its review. If the SEC votes to publish the proposed rule, the agency would typically provide at least 60 days for public comment. SEC staff would then evaluate feedback, consider revisions, and bring any final rule back to the commission for another vote. Bottom line: The custody rewrite could deliver long-awaited clarity on how advisers and funds can hold crypto, and it arrives amid a broader SEC effort to formalize digital-asset regulation. OMB’s review and the SEC’s next move are likely to draw close attention from custody providers, market participants, and lawmakers, since the final details could materially shape custody practices, qualified custodian definitions, and the tools available to advisers managing crypto for clients.