Daily · US Crypto Regulation and Fund Custody · October 6, 2026

Key points

FinCEN withdraws digital asset AML proposals

The Financial Crimes Enforcement Network (FinCEN) announced the withdrawal of two significant regulatory initiatives concerning digital assets. First, FinCEN withdrew a notice of proposed rulemaking (NPRM) that would have required banks and money service businesses (MSBs) to submit reports, keep records, and verify the identity of customers for transactions involving convertible virtual currency (CVC) or digital assets with legal tender status (LTDA). The proposed requirements specifically targeted CVC or LTDA held in unhosted wallets or in wallets hosted in jurisdictions identified by FinCEN. FinCEN stated it will not take any further action on this NPRM.

Second, FinCEN withdrew its finding and proposed rulemaking under section 311 of the USA PATRIOT Act. The withdrawn finding had designated international CVC mixing as a class of transactions of primary money laundering concern. The associated proposed special measure would have mandated enhanced recordkeeping and reporting requirements for these specific transactions.

These withdrawals remove pending compliance obligations for financial institutions handling digital assets, particularly those involving unhosted or foreign-hosted wallets. While other anti-money laundering (AML) obligations remain in effect, the removal of these specific proposed measures reduces regulatory uncertainty for digital-asset payment and custody operations.

SEC proposes crypto custody and compensation rules

The U.S. Securities and Exchange Commission (SEC) proposed new custody rules under the Investment Company Act of 1940 for regulated investment companies to custody crypto securities and similar investments. Concurrently, the SEC proposed amendments to custody, reporting, and recordkeeping rules under the Investment Advisers Act of 1940 for registered investment advisers custodialing client crypto funds and securities. The proposal aims to modernize current custody rules to address industry practices and includes redesignating the custody rule under the Investment Advisers Act, with corresponding amendments to Form ADV and Form ADV-E.

The SEC also proposed amendments to Form ADV and Form N-CEN to improve public disclosure quality, adding new questions related to tokenized private funds and regulated investment company shares. In a separate proposal, the SEC sought to amend rules regarding performance-based compensation for investment advisers. This would expand the ability of advisers to receive performance-based compensation from clients that are registered management investment companies and business development companies (regulated funds), subject to conditions. The proposal also revises the 'qualified client' definition to include investors meeting the 'accredited investor' definition in Regulation D under the Securities Act of 1933.

These proposals require US fund and adviser compliance teams to assess changes in custody, recordkeeping, and disclosure for crypto and tokenized fund products. If adopted, the revised qualified client definition and expanded regulated-fund eligibility would alter fee structures and compliance reporting for investment advisers.

FCA reviews whistleblower interactions

The Financial Conduct Authority (FCA) announced that it will review its interactions with whistleblower Simon Andriesz following his death. The FCA stated it had been in contact with Mr. Andriesz over many years and has asked Lea Paterson, a new independent non-executive director on its Board, to conduct the review. Additionally, the FCA reported that the number of whistleblowing reports increased by 22% last year. Of the 1,252 whistleblowing reports closed in the previous year, 42% led to direct action to manage or reduce harm, while a further 53% informed the FCA's wider work and supported harm prevention.

Central bank speeches on policy and digital money

Antoine Martin of the Swiss National Bank (SNB) delivered a speech titled 'Monetary policy implementation in an environment with abundant reserves,' signaling the central bank's operational stance on reserve management. In the European context, Piero Cipollone of the European Central Bank (ECB) gave a speech on 'Money in the digital age: digital euro, tokenisation and the role of central banks.' Frank Elderson of the ECB published a speech titled 'Effective supervision through timely remediation,' while Philip R. Lane gave an interview to Ansa.

Exchange rule changes and market infrastructure

The SEC approved The Options Clearing Corporation's (OCC) proposed rule change regarding the methodology to allocate clearing fund deposit requirements among clearing members, aiming to better align allocation with stress-based risk. Cboe BZX Exchange, Inc., Cboe C2 Exchange, Inc., and Cboe EDGX Exchange, Inc. filed proposed rule changes to amend Exchange Rules 22.6 and 5.52, granted immediate effectiveness. Texas Stock Exchange LLC filed a proposed rule change to adopt a transaction fee for orders executing in auctions. The SEC also adopted amendments to Volume II of the EDGAR Filer Manual, with Release 26.3 scheduled for deployment on September 14, 2026. Additionally, the SEC acknowledged receipt of ICE Futures U.S., Inc.'s notice of registration as a national securities exchange.

Sanctions designations and other regulatory notices

The Office of Foreign Assets Control (OFAC) published three notices designating persons on the Specially Designated Nationals and Blocked Persons List, requiring immediate screening and blocking by financial institutions with U.S. nexus. The SEC instituted proceedings to determine whether to approve or disapprove proposed rule changes by NYSE American LLC (Rules 903G and 906G) and NYSE Arca, Inc. (Rules 5.32-O and 5.35-O). A CFTC information collection request was forwarded to the Office of Management and Budget for review under the Paperwork Reduction Act of 1995. The SEC also published a proposed information collection extension for Rule 0-5 and announced a virtual national compliance outreach seminar for investment companies and advisers scheduled for November 19, 2026.

Our read

The simultaneous withdrawal of FinCEN's CVC reporting and mixing special measure proposals signals a significant reduction in regulatory friction for digital asset custody and payment operations in the United States. This move removes specific compliance burdens related to unhosted wallets and foreign-hosted jurisdictions, potentially lowering operational costs for banks and MSBs. Conversely, the SEC's proposal for new crypto custody rules indicates a continued push toward formalizing the integration of digital assets into traditional fund structures, requiring investment advisers to prepare for enhanced recordkeeping and disclosure standards. The FCA's review of its handling of a high-profile whistleblower case underscores the regulator's focus on internal governance and the tangible outcomes of whistleblowing, which may influence how firms manage their own reporting channels.

This digest was produced automatically by a large-language-model system from the regulator publications and official sources listed below; it is AI-generated content and may contain inaccuracies. It is not legal advice — verify wording and deadlines against the original documents.

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