SEC Crypto Custody Rule: What Firms Must Know Now

The U.S. Securities and Exchange Commission is getting close to formally proposing its long-awaited crypto custody rule, and the agency's own chief counsel has now sketched out what it will cover. For accounting firms, auditors, and CFOs holding or reporting on digital assets, that signal matters: the rule will reshape how custodial arrangements are documented, how stablecoin accounting is framed under U.S. GAAP, and where client assets can legally sit on the balance sheet.

What the SEC's Crypto Task Force Has Said

Taylor Lindman, chief counsel of the SEC's Crypto Task Force, spoke publicly about the custody proposal at a CoinDesk Policy and Regulation event in Washington, D.C. His remarks were notable for their clarity on scope and intent.

The core objective

Lindman described the custody effort as an attempt to let the market "understand how you can carry a non-security crypto asset within a broker-dealer without needing some special registration." For investment advisers, the proposal would clarify where client assets can be held, with state-chartered trusts cited as one eligible option.

The broader framing, in Lindman's own words, is assimilation: getting "existing securities intermediaries and existing market participants into a world where they feel comfortable utilizing blockchain, even holding crypto assets, transacting crypto assets, and that includes crypto assets that are securities as well as crypto assets that are non-securities."

The OMB hurdle still to clear

Before the SEC can formally propose the rule and open a public comment period, the draft must be cleared by the Office of Management and Budget at the White House. That step has not yet occurred. Once it does, the agency can publish the proposal in the Federal Register, triggering the standard notice-and-comment process. Firms will have a window to submit views before any final rule takes effect.

History and Context: Why the Previous Rule Failed

This is not the SEC's first attempt at a crypto custody rule. The agency advanced a custody proposal in 2023 under then-Chair Gary Gensler. That version took a restrictive stance: crypto firms themselves would not qualify to act as custodians for client assets. The proposal attracted significant industry pushback and never advanced to a final rule.

The policy reversal under new leadership

When President Donald Trump returned to the White House and appointed new, crypto-friendly leadership at the SEC, the Gensler-era proposal was scrapped entirely. The current Crypto Task Force was established as part of that reset. Lindman's remarks confirm the new team is building from scratch, with a philosophy oriented toward integrating crypto into existing market infrastructure rather than treating it as an exceptional carve-out.

That shift has direct accounting implications. If crypto custodians can be existing, regulated broker-dealers or state-chartered trusts, the counterparty profile of a firm's digital asset holdings changes, and so do the disclosure and audit trail requirements that follow.

Interim Measures Already in Place

While the formal proposal works through the OMB process, the SEC has already issued interim guidance to bridge the gap. Lindman referenced the agency's existing staff guidance designed to steer broker-dealers on crypto custody until permanent rules arrive. He also pointed to the SEC's September 2025 move to recognise certain entities as qualified crypto custodians.

What interim guidance means for your audit file

Interim SEC staff guidance does not carry the same legal weight as a final rule, but it does establish expectations that examiners and auditors will reference. Firms holding digital assets on behalf of clients should already be documenting their custodial arrangements against this guidance. Where a custodian has been designated as "qualified" under the September 2025 framework, that designation should be captured in the engagement file and tested at each reporting period.

For stablecoin accounting specifically, the qualified custodian question is material. A stablecoin held at a custodian that does not meet the SEC's evolving standard could require a different balance sheet classification or additional disclosure under ASC 350-60, the FASB's framework for crypto assets under U.S. GAAP.

Stablecoin Accounting and the Custody Rule

Stablecoins occupy an ambiguous space in the current regulatory architecture. They are generally not treated as securities, which places them in the "non-security crypto asset" category that the custody rule is explicitly designed to address. The practical question for finance teams is how the forthcoming rule will interact with existing accounting standards.

ASC 350-60 and the custodian classification problem

Under ASC 350-60, which became effective for fiscal years beginning after 15 December 2024, in-scope crypto assets must be measured at fair value with changes recognised in net income each period. The standard applies to fungible, intangible digital assets that sit on a distributed ledger, which captures most stablecoins a firm might hold. However, ASC 350-60 does not prescribe how the custodial relationship is classified or disclosed.

If the SEC's custody rule ultimately allows broker-dealers to hold stablecoins without special registration, the substance of the arrangement, who legally holds the asset, under what terms, and what recourse exists in insolvency, will drive the accounting classification. An arrangement that transfers control to the custodian may need to be derecognised from the client's balance sheet. One that retains the risks and rewards with the client will remain on-balance-sheet, with the custodian disclosed as a service provider rather than a counterparty.

IFRS crypto assets: a parallel consideration

For firms that report under IFRS or advise clients that do, the International Accounting Standards Board has not yet issued a dedicated standard for crypto assets equivalent to ASC 350-60. The IASB's agenda decision from 2019 pointed entities toward IAS 38 (intangible assets) or IAS 2 (inventories), depending on the business model. More recent IASB deliberations have explored whether a fair value model should apply, but no final standard exists as of this writing.

The SEC custody rule is a U.S. domestic instrument, but its effect on how custodial arrangements are structured will ripple into IFRS reporting. A firm that reports under IFRS and holds stablecoins through a U.S.-regulated broker-dealer must still apply the relevant IFRS derecognition and control tests, which are grounded in IFRS 9 and IAS 38 principles. The SEC's framework will define the legal structure; IFRS will then determine how that structure maps to the balance sheet.

For background on how the legislative stalemate over stablecoin legislation has already shifted obligations, see our earlier coverage of how the Clarity Act's Senate defeat reshaped stablecoin accounting obligations.

Broader SEC Crypto Agenda: Foundation Laying

Lindman placed the custody rule within a wider programme of work he called "foundation laying." The SEC has recently published a new rule proposal covering crypto asset offerings and introduced an exemption related to tokenization. Lindman acknowledged that much of this work is, in his words, "boring," but described it as the necessary groundwork for building a durable regulatory framework.

Tokenization and the custody linkage

The tokenization exemption referenced by Lindman is relevant for accounting purposes because tokenized securities raise the same custodial questions as native crypto assets. If a broker-dealer can hold a tokenized Treasury bond or money market fund unit under the same custody framework as a non-security crypto asset, firms need a single, coherent accounting policy that covers both. The custody rule, once proposed, will be the logical anchor for that policy.

Stablecoins in the regulatory framework

Lindman specifically mentioned stablecoins as an asset class the agency is now actively "thinking about," framing the work as placing them "within a framework that can be built upon for every generation to come." That framing suggests the SEC sees stablecoin classification, not just custody, as part of this rulemaking cycle. Finance teams should monitor the formal proposal carefully for any stablecoin-specific provisions that could affect USDC accounting, USDT accounting, or the treatment of yield-bearing stablecoin instruments.

The tax dimension of stablecoin treatment is also in flux. For the latest on congressional moves affecting digital asset tax reporting, our article covering what the Ways and Means Digital Asset Tax Certainty Act means for your digital asset accounting sets out the current legislative position.

Practical Steps for Accounting Firms and CFOs

The rule is not yet formally proposed, so no compliance deadline exists today. What does exist is a clear directional signal from the agency's own legal leadership, and the gap between that signal and the OMB clearance is the right moment to act.

Immediate actions to take now

First, map every custodial arrangement currently in place for client or proprietary digital asset holdings. Identify whether each custodian is (a) a regulated broker-dealer, (b) a state-chartered trust, (c) a non-bank qualified custodian under the Investment Advisers Act, or (d) none of the above. That mapping will become the basis for your post-rule compliance assessment.

Second, review the accounting policy for stablecoins under ASC 350-60. Confirm that fair value measurement is applied at each reporting date and that the disclosure of custodial risk is adequate under ASC 275 (risks and uncertainties). If fair value for a pegged stablecoin is treated as par without documented support, that assumption needs to be formalised before auditors arrive.

Third, for IFRS reporters, document the control and derecognition analysis for each custodial arrangement now, before the SEC rule crystallises the legal structure. Retaining that analysis will make the post-rule accounting update straightforward rather than a re-examination from scratch.

Fourth, subscribe to the Federal Register and flag the SEC's crypto custody proposal the moment it is published. The comment period will be the firm's opportunity to influence the final rule on points that affect audit practice, such as the definition of "qualified crypto custodian" and the requirements for segregation of client assets.

Frequently Asked Questions

What is the SEC crypto custody rule and when will it be proposed?

The SEC is developing a rule that would govern how broker-dealers and investment advisers hold crypto assets on behalf of clients. The draft must first be cleared by the White House Office of Management and Budget before the agency can formally propose it and open a public comment period. No specific publication date has been confirmed.

How does the forthcoming custody rule affect stablecoin accounting under ASC 350-60?

ASC 350-60 requires fair value measurement for in-scope crypto assets, including most stablecoins. The custody rule will define the legal structure of custodial arrangements, which in turn determines whether a stablecoin is on or off the client's balance sheet and what counterparty risk disclosures are required. Firms should align their accounting policy with the rule's definitions once the proposal is published.

Does the SEC custody rule apply to IFRS reporters?

The rule is a U.S. domestic instrument and does not directly bind IFRS reporters. However, if a firm holds digital assets through a U.S.-regulated custodian, the legal structure created by the SEC rule will feed into the IFRS control and derecognition analysis under IFRS 9 and IAS 38. IFRS reporters should monitor the proposal and assess its impact on their specific custodial arrangements.

What interim SEC guidance applies while firms wait for the final rule?

The SEC has issued staff guidance to steer broker-dealers on crypto custody in the interim. It also recognised certain entities as qualified crypto custodians in September 2025. Firms should document their custodial arrangements against this guidance now, as examiners and auditors will reference it during the rulemaking gap period.

What should an accounting firm do if a client's digital assets are held with a custodian that may not qualify under the new rule?

Begin a counterparty risk assessment immediately. Determine whether the custodian meets the criteria likely to appear in the formal proposal, drawing on the SEC's interim guidance as a proxy. If the custodian is unlikely to qualify, advise the client to begin evaluating alternatives now, and consider whether additional disclosure under ASC 275 is required in the next financial statements.

Source: CoinDesk Policy