The US Securities and Exchange Commission submitted a proposed amendment to its crypto custody rules for investment advisers to the White House Office of Management and Budget on August 25, 2026, setting in motion a formal regulatory process that could reshape how financial firms worldwide hold digital assets on behalf of clients.

The proposal targets Rule 206(4)-2 under the Investment Advisers Act of 1940, the legal framework that governs how registered investment advisers (RIAs) must safeguard client assets. The rule, commonly called the Custody Rule, was written long before blockchain technology existed and does not address how private keys, wallets, on-chain assets, or self-custody arrangements fit within its qualified custodian requirements. The SEC says the amendment will clarify how advisers and investment companies may hold crypto assets, and will strip out provisions the agency considers outdated.

The submission went to the Office of Information and Regulatory Affairs (OIRA), the White House body that reviews significant proposed rules before they are published for public comment. OIRA does not disclose rule contents during its review. Once that review concludes, the public will have at least 60 days to comment before any final rule can be adopted. The SEC's 2026 rulemaking agenda had initially projected a July 2026 release date for this proposal, meaning the August 25 submission arrived roughly four to six weeks behind schedule. The agency has flagged October 2026 as its target for formal proposed rulemaking, and a final rule is unlikely before 2027. The proposal is formally classified as "deregulatory" in the SEC's 2026 rulemaking agenda, a designation that carries legal and political weight and reflects the agency's stated posture toward market participants under its current leadership.

SEC Chairman Paul Atkins is driving the effort. In commentary tracked by securities law firms including Cleary Gottlieb and Paul Hastings in the context of the SEC's 2026 rulemaking, Atkins has described his goal as making the agency's rules "adaptable and adapted to the modern world and to this new technology." Cleary Gottlieb characterized the agency's current posture as reflecting "a determined focus on flexibility for market participants," a stance that represents a departure from the Gensler era, during which enforcement actions served as the primary regulatory tool for addressing conduct in crypto markets.

Some regulatory history is necessary to understand the fault lines now visible inside the commission. In February 2023, the Gensler-led SEC proposed a sweeping expansion of the Custody Rule into a renamed "Safeguarding Rule" that would have extended its investor-protection requirements to all asset classes, including crypto. That proposal was formally withdrawn in June 2025 without a final rule being adopted. Against that backdrop, when the SEC's Division of Investment Management issued a no-action letter in September 2025 allowing state trust companies to serve as qualified custodians for crypto assets, Commissioner Caroline Crenshaw dissented sharply, saying the move "degrades investor protections" and "circumvents proper rulemaking procedures." Her objection carries particular weight in light of the withdrawn Safeguarding Rule: a formal rulemaking attempt had already been abandoned, and the current SEC was now using staff letters to achieve related regulatory ends. Commissioner Hester Peirce called the same letter "an encouraging development."

The SEC has not waited for formal rulemaking to move. On August 12, 2026, the agency issued a no-action letter allowing registered funds to custody shares of affiliated tokenized government money market funds through a hybrid system that combines traditional book-entry records with blockchain infrastructure, extending a 1992 precedent to the blockchain context. The agency has also confirmed that broker-dealers may hold crypto and tokenized assets subject to certain conditions. Analysts say these interim steps may help institutional participants manage operational risk while the formal rule remains incomplete.

The proposal carries implications well beyond US borders. Sub-Saharan Africa recorded more than $205 billion in on-chain transaction volume in the twelve months ending June 2025, a 52 percent increase year over year, according to data from Ripple and Chainalysis as compiled by BIIA. The region's growth is driven largely by stablecoins, remittances, and hedging against local currency volatility. South Africa has approved 300 crypto asset service provider licenses under its Financial Sector Conduct Authority framework, with a 59 percent approval rate, as of December 2025. Nigeria has updated its securities law to recognize digital assets and is piloting an AML/CFT program covering anti-money laundering and countering the financing of terrorism for virtual asset providers. Kenya enacted its Virtual Asset Service Provider Act in October 2025 and published draft regulations in March 2026 that remain under public comment. For regulators and licensed firms in all three countries, the practical question is whether US-regulated custodians such as Coinbase Custody, Fidelity Digital Assets, and BitGo will expand international services once their own domestic framework is settled.

In South Asia, the timing of the SEC's submission is striking. Pakistan opened its PVARA crypto licensing portal on August 22, 2026, just three days before the SEC submission, following President Zardari's signing of the Virtual Assets Act 2026 in March. Pakistan's framework includes Shariah-compliant provisions, FATF-aligned anti-money-laundering protocols, and a three-phase licensing process for exchanges, custodians, and token issuers. As PVARA builds out its own custodian licensing standards, a clearer US definition of qualified custody in the digital asset context offers a practical reference point. India presents a contrasting picture: the country ranks among the highest globally in crypto adoption by volume and user base, according to Chainalysis, but regulators there have proceeded with caution rather than issuing licenses. A settled US custody framework signals to Indian policymakers that sophisticated investor-protection standards for institutional crypto are achievable without blanket restriction. Bangladesh, ranked 13th globally in the Chainalysis crypto adoption index despite an active ban on crypto trading, illustrates both the demand pressure on regulators and the remittance use cases that make international custody standards relevant across the region.

The next visible milestone is the conclusion of OIRA's review and publication of the proposed rule for public comment. There is no fixed deadline for OIRA to complete its work. A separate episode in August 2026 illustrates how coordination across agencies remains a live operational risk in the current rulemaking environment. The SEC had been scheduled to vote on a proposed innovation exemption for tokenization, also referred to as Regulation Crypto, but the vote was delayed. The SEC's official explanation cited an unforeseen scheduling issue. Insiders told Semafor that the actual cause was White House concern about the proposal's potential interference with pending legislation. Whichever account is accurate, the episode reveals the friction that can arise between the SEC and the executive branch when multiple crypto rules are advancing at the same time.