On October 1, 2026, the SEC issued a rulemaking proposal (Proposal) with significant modifications to the custody regimes for investment advisers under Rule 206(4)‑2 under the Investment Advisers Act of 1940. The SEC desires to facilitate custody of digital assets, while addressing the limitations of the existing custody regime for traditional securities and simplifying compliance with the custody requirements. The Proposal 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,” said SEC Chairman Paul S. Atkins in a statement accompanying the Proposal. This first article in a two-part series parses the elements of the Proposal relevant to private fund managers. The second article will consider the likely impact of key provisions of the Proposal on private fund managers; explore which provisions will be most challenging for the industry to adopt and why; and offer practical takeaways. See our two-part series on an SEC Crypto Roundtable on custody of digital assets: “Custody Challenges” (Jun. 5, 2025); and “Custody Models” (Jun. 19, 2025).