SEC Proposes Crypto Custody Rules as the UK Opens Licensing and ESMA Targets Non-MiCA Stablecoins

Regulators in the US, UK and Europe are defining who may hold digital assets, offer crypto services and connect stablecoins to customers.

This week's crypto regulation developments give firms several concrete dates and questions to work through. In the US, the Securities and Exchange Commission has proposed a custody framework for investment advisers and funds, while a community-bank group has challenged the banking regulator's approach to crypto trust charters. Across the Atlantic, UK firms now have a defined application window before a new authorization regime begins. European regulators and stablecoin issuers are also arguing over how MiCA should treat noncompliant tokens and the reserves behind compliant ones. A separate US tax bill addresses the recordkeeping burden of paying with stablecoins. These proposals and court claims are not final rules. Their immediate significance lies in the products, controls and applications that firms may need to prepare while the outcomes remain open.

SEC Proposes Crypto Custody Rules for Advisers and Funds, Opening a Path for New Custody Models

The US Securities and Exchange Commission proposed new crypto custody rules on October 1 for registered investment advisers and regulated funds. The proposal would create a tailored framework for holding client crypto assets and revise existing custody requirements; it is not yet in force.

The SEC says the changes could permit arrangements that are difficult under current rules, including certain forms of adviser self-custody and the use of state trust companies as qualified custodians when specified safeguards are met. The formal proposal is open for comment for 60 days after its Federal Register publication. Its scope is narrower than every crypto asset in every account: the applicable federal securities-law categories still matter.

For firms serving investors, the immediate task is to assess custody controls rather than assume a new product has been approved. Advisers will need to examine how a proposed custodian handles keys, segregation, records and oversight. That question also affects the crypto wallets and service providers that institutions may connect to client-facing products.

UK FCA Opens Crypto Authorization Applications Before the 2027 Regime

The UK's Financial Conduct Authority opened its cryptoasset authorization application period on September 30. Firms have until February 28, 2027 to apply ahead of the new regime scheduled to begin on October 25, 2027. Existing businesses may need a new authorization or a variation of permission, depending on their activities.

This is an application window, not an automatic approval for every firm currently operating in the UK. The FCA sets out a transition process and asks businesses to identify which of their activities fall inside the forthcoming framework. Operators should map products, legal entities and customer flows before submitting, then allow time for supervisory review.

The timetable matters to payment gateways and other crypto service companies because licensing can determine which parts of a product they can offer in the UK after the transition. Merchants using those providers may also need to know whether a checkout or settlement partner has secured the right permission.

ESMA Seeks MiCA Limits on Noncompliant Stablecoins as Circle Presses for Reserve Flexibility

The European Securities and Markets Authority asked the European Commission to make MiCA clearer about crypto services involving stablecoins that do not meet the bloc's requirements. In its September 30 consultation response, ESMA called for explicit restrictions so an EU-authorized service provider cannot use an ambiguous route to offer a noncompliant token.

The next day, issuer Circle submitted its own MiCA review response. Circle argued that the reserve framework for e-money tokens should allow more flexibility in high-quality liquid assets and bank deposits, while retaining robust redemption and supervision. These are two separate submissions to the review, not a joint rule or an agreed policy change.

For stablecoin payment infrastructure, both questions land in the same workflow: which tokens a regulated intermediary may support and how an issuer holds the assets backing them. A provider building cross-border settlement cannot treat MiCA authorization as a simple yes-or-no label without checking the token, issuer and service model.

Community Bankers Sue the OCC Over Crypto Trust-Bank Charters

The Independent Community Bankers of America filed suit against the Office of the Comptroller of the Currency on October 2, challenging the agency's authority to grant national trust-bank charters for crypto-focused businesses. The association also seeks to overturn the OCC's conditional approval of Protego's charter. These are the plaintiffs' claims; the court has not ruled on their merits.

The dispute follows the OCC's March trust-bank rule, which the regulator says clarifies existing authority rather than expanding it. ICBA argues that the approach could permit institutions to conduct activities beyond what the law allows without the obligations of a full-service bank. That legal distinction matters because custody, payments and deposit-like services can sit close together in a digital-asset business model.

The practical issue for business finance providers is counterparty certainty. A charter application or conditional approval is not the same as a final, litigation-proof operating framework. Firms integrating a trust-bank custodian should track both the regulator's permissions and the pending challenge.

Senator Daines Introduces ADAPT Act to Reduce Tax Friction in Stablecoin Purchases

US Senator Steve Daines introduced the ADAPT Act on September 30. The bill would change how certain digital-asset transactions are taxed, including purchases of goods and services with dollar payment stablecoins regulated under the GENIUS Act. It also proposes relief for network fees of no more than $10. The measure is a proposal, not current tax law.

Under the bill's approach, a qualifying stablecoin purchase would not require a consumer to calculate a gain or loss each time a token is spent. Network fees are another small but frequent source of records for crypto users. The proposal also extends wash-sale rules to digital assets, so it is not a blanket tax exemption for every crypto transaction.

For merchants considering crypto payments, the consumer-side reporting burden can influence whether a stablecoin is useful at checkout. Even if the legislation advances, businesses would still need to distinguish qualifying payment stablecoins and transactions from other assets and uses. The bill's progress, rather than its announcement alone, will determine whether that friction actually falls.