SEC Concedes Regulation Lagged Bitcoin, Announces Custody Proposal

Securities and Exchange Commission Chairman Paul Atkins conceded on Thursday that federal securities rules have failed to keep pace with Bitcoin's rapid expansion since its launch in 2008.

The regulator countered by unveiling a proposal aimed at updating the way advisers and funds hold crypto assets.

Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace.

To that end, today’s proposal would… https://t.co/9C5LvRb8b5

— Paul Atkins (@SECPaulSAtkins) October 1, 2026

What Is Behind the SEC's New Crypto Custody Plan?

The rule change modifies the Investment Advisers Act and the Investment Company Act to establish more explicit custody guidelines for digital assets.

Registered investment advisers and regulated funds such as mutual funds would be permitted to custody crypto under a structure designed for the current market rather than for outdated guidance.

Atkins stated that existing rules "have not kept pace" with an asset class that evolved from a niche test into a multi-trillion-dollar market. He described the proposal as a substitute for the ambiguity resulting from custody standards set years before crypto emerged.

“To that end, today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before—and replacing the grey of uncertainty created by custody rules crafted for a bygone era,” Atkins said in an official statement. 

Two key elements of the proposal are notable.

• Advisers may allow clients to self-custody crypto assets subject to certain requirements.
• State-chartered trust firms would be eligible as custodians, broadening the pool beyond banks and broker-dealers that previously filled that function.

The proposal comes several weeks after the CLARITY Act failed to move forward in the Senate. Legislators were unable to push through that wider market-structure bill on Sept. 15, prompting the SEC to proceed via rulemaking.

Why This Custody Update Matters for Investors

For a long time, stale custody regulations restricted how advisers could give crypto-related advice to clients. Funds also encountered obstacles when attempting to offer wider access to digital asset strategies via compliant routes.

Atkins linked the proposal to a broader initiative to position the US as the global leader in crypto. That initiative already involves stopping regulation-by-enforcement methods and developing more transparent tokenization structures for the sector.

Once the proposal is published in the Federal Register, a 60-day public comment period will begin. Stakeholders are anticipated to submit feedback on the self-custody rules and the expanded custodian eligibility for state trust companies.

This represents one of the most distinct regulatory moves under Atkins to date. It provides institutional investors with a clear, compliant route to Bitcoin and other digital assets. Lower legal uncertainty may speed up mainstream adoption that earlier regulations had effectively held back for years.