SEC crypto proposals are advancing while comprehensive market structure legislation remains unresolved. On Sept. 15, the Senate rejected cloture on the motion to proceed to the Digital Asset Market Clarity Act (H.R. 3633), known as the CLARITY Act, by a vote of 49-50. The procedural vote fell 11 votes short of the 60 required to advance. It did not reject the bill on final passage.

On Oct. 1, the Securities and Exchange Commission proposed a framework for crypto custody by registered investment advisers and regulated funds. Alongside its earlier Regulation Crypto Assets proposal, the initiative addresses two related questions: how certain crypto offerings could raise capital and how investment managers could safeguard crypto assets. Source: SEC.

For token issuers and fund managers, these developments provide proposals to evaluate. They do not establish new permissions to rely on today.

What the Senate Vote Means

The failed cloture vote prevented the Senate from advancing to consideration of the legislation through that motion. It did not enact a market structure framework or permanently foreclose further action on the bill.

The distinction matters for planning. Legislative timing remains uncertain, and the vote alone does not establish whether Congress will act before the end of 2026. Issuers and managers must continue to operate under applicable law while monitoring both congressional developments and agency rulemaking.

SEC Crypto Proposals Address Issuance and Custody

Regulation Crypto Assets would establish an offering framework for certain investment contracts involving crypto assets. An investment contract is a type of security; the proposal distinguishes that arrangement from the underlying crypto asset.

The proposed startup exemption would permit eligible offerings of up to $5 million during a period of up to four years. A separate fundraising exemption would permit up to $20 million under Tier 1 or up to $75 million under Tier 2 during each 12-month period. Conditions would include disclosures and, depending on the exemption, reporting and financial statement requirements. Antifraud and antimanipulation provisions would continue to apply.

The proposal also includes a conditional investment contract safe harbor. It would address when an investment contract has ceased to exist after an issuer completes or permanently stops the essential managerial efforts it promised investors and satisfies the required filing conditions. It is not a blanket exemption for crypto assets.

Comments on Regulation Crypto Assets are due Oct. 20, 2026, under File No. S7-2026-27.

The Oct. 1 custody proposal addresses the safeguarding of crypto assets, including control of the private keys used to authorize transactions. It would allow the use of state trust companies as custodians, permit self-custody in specified circumstances and revise related audit and broker-dealer custody requirements. In this proposal, regulated funds means registered investment companies and business development companies. Private funds should evaluate the provisions applicable to their advisers rather than assume every regulated fund provision applies to them.

For adviser self-custody, the proposed conditions include a documented determination that no qualified custodian is available to maintain the asset, relevant safeguarding expertise and systems, and reassessment at least quarterly. Here, self-custody means an adviser holding client assets itself. The requirements extend beyond these examples and would need to be evaluated in full. Source: SEC proposing release, sections II.A.2-3.

Issuance and custody are connected, but neither alone determines institutional demand. Offering requirements affect how an issuer can raise capital. Custody requirements affect how an investment manager can safeguard an asset within its applicable regulatory framework. Investment mandates, liquidity and risk controls remain separate considerations.

From Proposal to Final Rule

Neither proposal is a final rule. Proposed exemptions and custody permissions are not currently available simply because the SEC has published them.

The SEC would need to review public comments and decide whether to adopt final rules. Any adopted text could differ from the proposals. Effective dates and compliance deadlines would also matter for implementation.

The SEC has specified that the custody proposal’s comment period will remain open for 60 days following publication of its proposing release in the Federal Register. That publication date should be checked before assigning a calendar deadline.

The practical distinction is between evaluating a possible framework and implementing an adopted one. Planning can begin before adoption, but operational decisions must account for existing requirements and the possibility of revisions.

Commission Changes and Rulemaking

The SEC acknowledged Commissioner Hester Peirce’s departure in an Oct. 1 statement, crediting her leadership of the Crypto Task Force. Her departure is a leadership transition for the agency’s digital asset work.

Separately, on Sept. 30, the SEC adopted an amendment to its quorum rule. The amendment provides that one commissioner can constitute a quorum for a particular matter when all other sitting commissioners are disqualified from participating. The existing rule already accommodated a Commission with fewer than three members. The amendment takes effect upon Federal Register publication.

These procedural developments warrant attention, but they do not establish that future crypto rules will be adopted faster or be more vulnerable in court. Those assessments depend on the substance of a rule, the agency’s authority and the process used to adopt it.

What Issuers and Fund Managers Should Monitor

For issuers, the relevant questions include eligibility for the proposed offering exemptions, disclosure obligations and the conditions of the investment contract safe harbor. For advisers and fund managers, the custody proposal raises questions about custodian eligibility, safeguarding systems, audits and operational responsibilities.

SEC crypto proposals provide a concrete basis for analysis while the legislative outcome remains uncertain. The next confirmed deadline is Oct. 20 for Regulation Crypto Assets comments. The custody comment deadline will depend on Federal Register publication. Monitoring changes to the proposed text, final adoption and compliance dates will be essential to understanding what becomes actionable.

Disclosures: This article is for informational purposes only and should not be considered financial, legal, tax, or investment advice. It provides general information on cryptocurrency without accounting for individual circumstances. Sarson Funds, Inc. does not offer legal, tax, or accounting advice. Readers should consult qualified professionals before making any financial decisions. Cryptocurrency investments are volatile and carry significant risk, including potential loss of principal. Past performance is not indicative of future results. The views expressed are those of the author and do not necessarily reflect those of Sarson Funds, Inc. By using this information, you agree that Sarson Funds, Inc. is not liable for any losses or damages resulting from its use.