Statement on Proposal to Address the Custody of Crypto Assets Under the Investment Advisers Act and the Investment Company Act

Today, the Commission proposed to close a gap that has left investment advisers and funds guessing how to effect lawful custody of an asset class that their clients increasingly demand. This is another significant step toward bringing our regulatory frameworks into the modern era and fulfilling our commitment to cement the United States as the crypto capital of the world.

Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure. Unfortunately, our rules and regulations have not kept pace. To that end, today's proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before-and replacing the grey of uncertainty created by custody rules crafted for a bygone era.

Many areas of the custody rules under the Investment Advisers Act of 1940 and Investment Company Act of 1940 predate the internet; they were designed to protect the assets of advisory clients and regulated funds from loss, theft, misuse, and misappropriation. Notably, they contemplate the custody and safekeeping only of traditional assets - an untenable situation in the 21^st century.

A key protection in the current rules is the required use of permitted custodians. However, with newly developed crypto assets, custodial capabilities may lag an asset's deployment by many months. That is a substantial problem, one which today's proposal intends to solve. In doing so, we will further modernize our regulatory framework, and we will help ensure the United States remains the global leader in crypto innovation for decades to come.

In addition to the proposed crypto-specific custody framework, the proposal would also implement a number of long-needed modernizations of the current investment adviser and regulated fund custody rules. These provisions have not been amended for decades. Therefore, this proposal seeks to ensure that they are fit for purpose and better address current industry practices and feedback.

Today's proposed crypto custody framework is not an isolated initiative. It is another element of a comprehensive crypto asset regulatory approach. It began with ending regulation by enforcement. In December 2025, Commission staff issued a no-action letter to the Depository Trust Company regarding DTC's voluntary securities tokenization pilot program. And in January 2026, Commission staff issued a statement on tokenized securities that provided a clear tokenization taxonomy for the marketplace.

The Commission followed with an interpretation regarding which crypto assets are securities and when crypto assets may cease to be subject to investment contracts. In April, Commission staff published a statement regarding broker-dealer registration implications for certain user interfaces utilized to prepare transactions in tokenized securities. And in August of this year, we proposed Regulation Crypto Assets, which would create a tailored offering regime for certain investment contracts involving crypto assets. Most recently, we introduced an Innovation Exemption, providing a cabined pathway to facilitate the trading of tokenized NMS stock.

These efforts acknowledge that blockchain technology holds the potential to modernize the financial system, and that onchain markets should not be relegated offshore or forced into ill-fitting regulatory models. That said, our work is not finished. More regulatory proposals are on the horizon, and I look forward to continuing to help President Trump cement the United States as the crypto capital of the world.