The U.S. Securities and Exchange Commission unveiled a draft rule on Thursday that would define how investment advisers and funds may custody crypto assets belonging to their clients. The proposal, released as part of the agency’s broader digital‑asset agenda, seeks to replace the current patchwork of custody standards that were written for traditional securities and are ill‑suited to the digital‑asset market.

Under the draft, firms would be required to demonstrate that no qualified custodian is available before they could hold client crypto themselves. If an adviser chooses self‑custody, it would need to meet specific expertise criteria and undergo a quarterly review to confirm that a suitable external custodian has not become accessible. The rule also permits the use of state‑chartered trusts as custodians and would apply to both regulated funds and investment advisers.

SEC Chairman Paul Atkins said the existing framework, which was designed for traditional assets, “only considers the custody and safekeeping of traditional assets — an untenable situation in the 21st century.” He added that the new rule would give advisers a compliant pathway for managing crypto assets that has been missing until now.

The proposal runs more than 760 pages and is open for a 60‑day public comment period. It follows two recent SEC actions: an “Innovation Exemption” for tokenizing securities and a separate regulation outlining how companies can raise capital using digital assets. Both initiatives aim to provide clearer regulatory pathways for crypto‑related activities.

The timing of the release coincides with the departure of Commissioner Hester Peirce, who has headed the agency’s Crypto Task Force since its creation. Her exit will reduce the commission’s membership to two, a change that the SEC recently formalized by lowering the quorum requirement from three to two commissioners.

Industry observers note that the draft rule marks the latest step in the SEC’s effort to map out a comprehensive regulatory landscape for digital assets, a landscape that has previously been shaped largely by ad‑hoc guidance and enforcement actions.