SEC Proposes New Rule for Investment Advisers to Hold Bitcoin for Clients: Which Coins Will See Over $100 Trillion in Managed Funds First?
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
The SEC has introduced a proposed crypto custody rule that may allow registered investment advisers to directly hold Bitcoin (CRYPTO:BTC) and other cryptocurrencies for their clients. Given that these advisers manage over $100 trillion, even a small shift toward crypto could channel significant funds into the market.
Until now, most investment advisers have refrained from buying Bitcoin in managed accounts because of strict custody regulations. The existing rules required the use of a qualified custodian without clearly defining who could hold a private key. If the new proposal is finalized, it raises an important question: which cryptocurrencies will see the first influx of adviser money?
The SEC’s Crypto Custody Rule Adds New Custodians for Advisers
Investment advisers responsible for client assets must typically engage a qualified custodian—a regulated bank or broker responsible for safeguarding those assets. These standards were designed for traditional investments like stock certificates, but the unique nature of cryptocurrencies, which are controlled by private keys, complicates matters. In fact, the SEC withdrew a 2023 proposal on custodial safeguards on June 12, 2025, leaving a gap until now.
The new proposal updates the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Under this plan, state trust companies could serve as custodians if they implement written safeguarding policies and submit annual audited financial statements. Registered broker-dealers could also qualify based on customer protection standards. Additionally, regulated funds might expand their crypto offerings, and under certain conditions, airdropped coins could stay within the new rules.
SEC Chair Paul Atkins commented that cryptocurrency has evolved “from a niche curiosity into a multi-trillion-dollar asset class” since the release of the Bitcoin white paper in 2008, noting that “our rules and regulations have not kept pace.” This proposal comes on the heels of various crypto regulations introduced by the SEC in September, following the Senate’s failure to advance the CLARITY Act.
Advisers Could Hold Crypto Keys Themselves Under Strict Conditions
One notable aspect of the proposal is that it allows advisers to hold private keys themselves, but only after they demonstrate that they could not find an approved custodian for the asset. To ensure security, at least two individuals must authorize any use of these keys, and each client’s coins must be stored in separate addresses.
Moreover, an independent auditor must evaluate the adviser’s custody controls within six months, and fund boards will review the adviser’s determination quarterly. These strict conditions could make self-custody too costly for most advisers, likely leading them to stick with cryptocurrencies that custodians already support.
Spot ETF Assets Show Where Adviser Money Could Go First
Spot crypto exchange-traded funds (ETFs) give us a glimpse into where regulated funds are being directed once they have a compliant path. As of September 25, 2026, US spot Bitcoin ETFs held $108 billion, while Ethereum (CRYPTO:ETH) funds accounted for $17.8 billion. In comparison, Solana (CRYPTO:SOL) funds had $2 billion, and XRP (CRYPTO:XRP) funds held $1.8 billion.
These figures show that Bitcoin funds currently control about six times Ethereum’s total investments and more than fifty times Solana’s, with Bitcoin funds already owning 6.29% of all Bitcoin.
While the proposal does not specify particular cryptocurrencies, custodians will ultimately decide which coins advisers can access, as the costs of full self-custody are challenging for many firms.
Which Coins Will the SEC Crypto Custody Rule Help First?
Bitcoin is poised to be the first cryptocurrency to reach adviser accounts, with Ethereum likely following, as custodians already support both. ETF data indicates that regulated money has a clear preference for these assets. The proposal effectively removes the primary legal barrier that has kept advisers away from crypto, but the SEC must finalize the rule before any changes take effect.
The 60-day comment period will commence once the proposal is published in the Federal Register. If the final regulations include a broader list of custodians and relax self-custody requirements, smaller cryptocurrencies like Solana and XRP could also find their way into advised accounts more quickly. Ultimately, does the SEC crypto custody rule primarily extend the advantage that Bitcoin and Ethereum already possess?
Contact [email protected] for any questions or corrections.
Sam Daodu is a crypto analyst and the editor of 24/7 Wall St.'s Crypto Desk, where he covers Bitcoin, XRP, Ethereum, Solana and the altcoins investors search for most. His work focuses on price levels, spot ETF flows, on-chain data and the regulatory decisions that move crypto markets, written so a first-time buyer and a seasoned trader can both use it.
Sam has written about crypto professionally since 2019 and has published more than 2,000 articles. Before joining 24/7 Wall St., he wrote for crypto media outlets and Web3 companies and ghostwrote for crypto founders and token launches. His analysis is syndicated on Yahoo Finance, MSN and AOL and has been cited by other crypto news sites. He also founded MacLabs Marketing, a content and personal branding agency for crypto founders and executives.
When he isn't reading charts, Sam is usually at the gym or watching One Piece, a series he maintains has better tokenomics than most altcoins.
