SEC sends deregulatory crypto custody rewrite to White House budget office

The U.S. Securities and Exchange Commission has sent proposed Amendments to the Custody Rules to the White House Office of Management and Budget, a draft received Aug. 25 that would clarify how investment advisers and investment companies hold client crypto and partially repeal some existing custody requirements under the Investment Advisers Act and Investment Company Act. Though the text remains sealed, federal labels mark the filing as economically significant and deregulatory under Executive Order 14192, and the SEC has indicated the effort would modernize custody of adviser and fund assets, including crypto, while removing burdens from outdated provisions after the agency received questions from advisers on compliant digital-asset holding, following withdrawal of former Chair Gary Gensler’s 2023 Safeguarding Rule in June 2025. That earlier proposal had drawn sharp pushback after Gensler warned advisers could not treat crypto platforms as qualified custodians and sought to funnel client crypto to a narrow set of banks, trust companies, broker-dealers, or futures commission merchants. The new move fits Chair Paul Atkins’s shift toward formal rulemaking, including 2025 dismissals of cases against major crypto firms such as Coinbase, guidance that meme coins are not securities and that certain staking activities fall outside securities law, last week’s Regulation Crypto Assets capital-raising framework built on March SEC-CFTC joint guidance, and signaled plans for an innovation exemption for tokenized securities on decentralized platforms, with an October formal custody proposal targeted to open more than 60 days of public comment while the House-passed Clarity Act remains stalled in the Senate ahead of a expected post-recess cloture vote.