SEC Allows State-Chartered Trusts to Custody Crypto Assets
The U.S. Securities and Exchange Commission (SEC) has clarified rules for crypto custody. On Tuesday, its Division of Investment Management issued a no-action letter. This letter permits investment advisers to use state-chartered trust companies as qualified custodians for digital assets. The decision gives advisers clear guidance on holding crypto for clients.
Previously, advisers were unsure if state trust firms could legally hold crypto. Many avoided these firms due to regulatory concerns. The SEC now confirms these firms can serve as custodians if they have strong safeguards. Advisers must ensure clients’ assets remain protected.
Details of the SEC’s No-Action Letter
The letter was issued after a request from law firm Simpson Thacher & Bartlett. They asked if venture capital and other advisers could rely on state trust companies to hold crypto for registered financial institutions.
The SEC stated these firms qualify as custodians if advisers confirm it benefits their clients. Fund managers must also review the firms’ security procedures before selecting a custodian.
SEC Commissioner Hester Peirce praised the update. She said it ends the uncertainty advisers faced when choosing crypto custodians. Peirce added the letter covers both client-held crypto and tokenized securities. She called for custody rules to modernize with “principles-based” approaches that fit today’s market.
Industry Response and Future Outlook
- Bloomberg ETF analyst James Seyffart called the letter “a textbook example of more clarity for the digital asset space.”
- Wyoming Senator Cynthia Lummis welcomed the decision, noting the SEC recognized Wyoming’s state trust framework. Wyoming pioneered similar relief in 2020 despite earlier SEC criticism.
- Brian Daly, Director of the SEC’s Division of Investment Management, said the letter is an interim step. He expects full rule-making to follow as custody laws are updated.
This SEC move allows crypto advisers to use more trusted custodians. It resolves long-standing doubts and signals regulators are adapting to digital asset markets.
