The SEC's crypto custody proposal arrives just as the commission shrinks to two

On October 1, 2026, the U.S. Securities and Exchange Commission proposed a dedicated custody framework for crypto assets held by investment advisers and regulated funds. A day later, Commissioner Hester Peirce, who led the agency's Crypto Task Force, stepped down, leaving the commission with just two members. That raises a practical question: does this proposal actually change who can hold crypto for advisers and funds, and how much does a two-person SEC change the odds that it becomes durable law?

The short answer

The proposal has real substance. It would let state-chartered trust companies act as crypto custodians, and it would let advisers hold client crypto themselves, but only as a documented, temporary last resort. It is not final, its 60-day comment clock starts only on Federal Register publication, and every next step now depends on two commissioners, Chairman Paul Atkins and Commissioner Mark Uyeda, agreeing. Read it as a clear signal of direction, not a settled rulebook.

What the SEC proposed

According to The Block, the framework gives advisers and funds three routes: traditional qualified custodians, state trust companies, and limited adviser self-custody. The agency announced it in SEC Press Release 2026-100. Genfinity describes a roughly 760-page proposal amending rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, filed under File No. S7-2026-35, aimed at registered investment advisers, registered investment companies and business development companies.

State trust companies move inside the perimeter

Under the conditions reported by Genfinity, a state trust company would need explicit authorization from its state regulator to provide crypto custody, reasonable procedures against loss, theft and misappropriation, audited financial statements with internal-control reporting, and strict segregation of client assets from its own holdings. crypto.news adds that advisers and funds "must assess the company's state authorization and written safeguards before appointing it, then repeat those checks annually."

Adviser self-custody is a narrow carve-out

The phrase "self-custody" has caused confusion. Here it means an adviser holding assets on behalf of clients, not individuals keeping their own coins. Peirce drew that distinction explicitly, per The Block. The conditions reported by Genfinity are tight:

• Permitted only when no qualified custodian exists for a specific asset, and the adviser must document that absence before starting.
• Reassessed every quarter.
• Assets must move to a qualified custodian as soon as one becomes available.
• At least two authorized individuals must approve any transfer.

Why the SEC says it is needed

Atkins framed the gap in scale terms: "Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class," he said, as quoted by Genfinity, while The Block reports him saying the agency's "rules and regulations have not kept pace." Peirce went further on principle: "Regulators should zealously protect investors' right to self-custody and not attempt to force investors to custody their assets with someone else."

The two-member commission problem

Peirce's last day was Friday, October 2. That leaves Atkins and Uyeda as the only sitting commissioners, with three seats vacant. As of The Crypto Times report on September 29, the White House had not announced a nominee for her seat. She had been serving in holdover status since her term expired on June 5, 2025.

The SEC prepared for this. On September 30 it adopted an amendment to its quorum rule, published in the Federal Register and effective on October 2. Quorum is still three members, but when the number in office, minus those disqualified, is two or one, "that number of members shall constitute a quorum." The commission adopted the change without notice and comment, classifying it as internal agency management, as TheCorporateCounsel.net noted.

The practical consequence: the SEC can keep working, but with two members, any action needs both of them on board, and a recusal can leave a single commissioner acting alone. That is efficient while the two agree. It also concentrates the whole U.S. crypto rulebook in two votes.

A crowded docket

The custody proposal is not alone. The SEC proposed Regulation Crypto Assets on August 18, 2026, with a startup exemption of up to $5 million over four years and fundraising tiers of up to $20 million and $75 million per 12 months. Its comment period closes on October 20, 2026, according to law firm Cahill Gordon & Reindel. Meanwhile, Forkast reporting carried by Yahoo Finance notes the CLARITY Act failed a Senate cloture vote on September 15, which leaves agency rulemaking as the main live channel for U.S. crypto market-structure policy.

What it could mean in practice

For advisers who have stayed out of spot crypto because custody felt like guesswork, a final rule along these lines would replace guesswork with a checklist. For state-chartered crypto custodians, it would be a competitive opening next to the banks and broker-dealers that dominate traditional custody. For investors in advised accounts and funds, the protections worth reading for in the final text are segregation, audits, annual due diligence and dual approval of transfers.

The open questions are just as concrete: how strictly "no qualified custodian available" will be interpreted; whether the final text keeps state trust companies on equal footing; and whether a rule produced by a two-member commission will hold up once the seats are filled.

What we know vs. what we're inferring

Known (reported from SEC materials and official filings):

• The custody proposal was announced on October 1, 2026, and covers registered advisers, registered investment companies and BDCs.
• It allows state trust companies as custodians and adviser self-custody only when no qualified custodian is available, with quarterly reassessment.
• Public comment runs 60 days after Federal Register publication.
• The amended quorum rule took effect on October 2; Peirce's last day was October 2; Atkins and Uyeda remain.

Inferred (our reading, not confirmed):

• We could not confirm a Federal Register publication date for the custody proposal at the time of writing. If it is published in mid-October, the comment window would likely run into December, which would push any final rule into 2027.
• Two-member governance should make agreement faster while Atkins and Uyeda are aligned, but it raises durability questions, since a fuller future commission could revisit the rule.
• Some secondary coverage gives slightly different dates for the release and for Peirce's exit. We rely on the SEC release numbering, the Federal Register and contemporaneous legal-industry reports.

What to watch next

• October 20, 2026: comment deadline for Regulation Crypto Assets. We have not confirmed the exact cutoff time; in October, ET runs one hour behind UTC-3 (for example, 11:59 p.m. ET equals 12:59 a.m. UTC-3 on October 21).
• Federal Register publication of the custody proposal (date not yet announced): this starts the 60-day comment clock.
• White House nominations for the three vacant SEC seats, and the Senate confirmation calendar that follows.
• Comment letters from custodians, banks and adviser groups on the definition of "qualified custodian" and the state trust company route.

Educational information only — not financial advice.