What is a qualified custodian in crypto?

A qualified custodian is a regulated firm that holds client assets on behalf of an investment adviser, as required by the SEC's custody rule. In crypto, the question is which firms can hold digital assets in a way that meets that rule. The broader business of institutional crypto custody is covered in our guide to crypto custody.

What is a qualified custodian under the custody rule?

The custody rule is Rule 206(4)-2 under the Investment Advisers Act of 1940. It says an adviser with custody of client funds or securities must make sure a qualified custodian holds them, either in a separate account for each client or in an account holding only clients' assets.

The rule defines four kinds of qualified custodian:

• A bank as defined in the Advisers Act, or a savings association with FDIC-insured deposits.
• A registered broker-dealer holding the assets in customer accounts.
• A registered futures commission merchant, but only for certain futures-related assets.
• A foreign financial institution that normally holds financial assets for customers and keeps clients' assets separate from its own.

The adviser also needs a reasonable belief that the custodian sends clients statements at least every quarter, and an independent accountant must run a surprise exam of the assets once a year.

Why is crypto custody harder under the rule?

The rule was written for traditional assets, and the SEC's fact sheet notes that permitted custodians may not exist for some crypto assets. It also says whether a state-chartered limited purpose trust company counts as a bank under the rule depends on a fact-specific legal analysis. That uncertainty has mattered because many crypto custodians are state trust companies.

The SEC has changed direction several times. An earlier proposal to extend the rule to all client assets, including crypto, was withdrawn on June 12, 2025, according to law firm Dorsey & Whitney. On September 30, 2025, SEC staff issued a no-action letter allowing advisers and regulated funds to treat certain state trust companies as banks for crypto custody, The Block reported. Related accounting guidance also changed, as our SAB 121 guide explains.

What did the SEC propose for crypto custody in 2026?

On October 1, 2026, the SEC proposed a tailored crypto custody framework for advisers and regulated funds. According to the SEC and a Sullivan & Cromwell summary, it would:

• Move the adviser custody rule to a new Rule 223-1.
• Let advisers use state trust companies for crypto if they meet conditions such as state supervision, due diligence, audited financials and segregation of client assets.
• Allow advisers to self-custody a crypto asset only when no qualified custodian is available for it, with safeguards such as two-person approval and one address per client.

As of November 2026, these are proposals only, and Sullivan & Cromwell lists a comment deadline of December 7, 2026. The current rule stays in force unless final changes are adopted. See also what the SEC does in crypto.

Rules differ by country and change often. Check the regulator or a qualified professional for your own situation.