SEC Sends Draft Crypto Custody Rule Update to White House for OMB Review

CoinDesk reports that the U.S. Securities and Exchange Commission has forwarded a draft update to its crypto asset custody rule to the White House for review, marking the early stage of a new rulemaking effort aimed at investment advisers and investment companies. Disclosures show the draft was submitted to the White House Office of Management and Budget (OMB) on August 25. The SEC is not expected to publish the text or move to a Commission vote until the OMB completes its review. The revision focuses on a central question under the SEC's custody framework: how investment advisers and investment companies should hold crypto assets for clients. The agency noted that parts of the existing custody regime were written before crypto assets became part of regulated investment activity, leaving uncertainty over how certain requirements apply. Under current SEC rules, when a registered investment adviser has custody of client funds or securities, those assets generally must be maintained with a "qualified custodian," unless an exception applies. Crypto custody raises different issues than traditional securities, including private-key control, onchain ownership verification, and blockchain-based custody systems, which create interpretation challenges under legacy regulations. The draft is intended to address these gaps. The SEC is also weighing the removal of requirements it views as outdated and misaligned with current trading and asset-holding practices. As a result, the package could both add crypto-specific provisions and refresh older elements of the broader custody rule. The initiative is separate from the SEC's earlier effort. In March 2023, the SEC proposed a "Customer Asset Protection" rule that would have expanded custody obligations for registered investment advisers to cover more client assets, including cryptocurrencies. The proposal drew significant industry concern, in part because many crypto custodians might not have met the definition of a "qualified custodian," potentially limiting how advisers could custody digital assets for clients. In June 2025, the SEC withdrew that Gensler-era proposal, saying any future action would require a new proposal. The draft now under OMB review is described as a separate, independent rulemaking effort launched under Chair Paul Atkins. Next steps include a public comment process. After OMB review, the draft returns to the SEC, where commissioners will decide whether to formally issue the proposal. If approved, the full text would be released for the first time. Under standard procedures, publication is typically followed by at least a 60-day comment period for investment advisers, investment companies, custodians, crypto firms, and other stakeholders. SEC staff would then evaluate comments, make potential revisions, and bring a final rule back to the Commission for another vote. The SEC has also placed crypto assets, broker-dealer rules, and market structure on its 2026 regulatory agenda, alongside congressional efforts related to digital asset market structure legislation.