SEC Opens Door for State Trust Companies to Custody Crypto Assets

Quick Breakdown 

• SEC grants no-action relief allowing advisers to use state trust companies for crypto custody.
• The move signals potential updates to existing custody rules under the Advisers Act and Investment Company Act.
• While praised by industry voices and lawmakers, the decision drew criticism from Commissioner Caroline Crenshaw.

The U.S. Securities and Exchange Commission (SEC) staff has taken a rare step toward easing restrictions on cryptocurrency custody, issuing a no-action letter that could reshape how investment advisers handle digital assets .

SEC staff grants no-action relief

In its letter released Tuesday, the SEC’s Division of Investment Management said it would not recommend enforcement action against advisers who use state-chartered trust companies as custodians for crypto assets. The move came in response to a request from law firm Simpson Thacher & Bartlett, which sought assurance that registered institutions, including venture capital firms, would not face penalties for such custody practices.

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ALT TXT: Law firm Simpson Thacher & Bartlett requested assurances from the SEC that state trust companies could custody cryptocurrency assets. 

Source: SEC

The letter marks the second no-action relief granted by the SEC this week, underscoring the Trump administration’s broader hands-off approach toward digital asset oversight in an effort to keep the U.S. competitive.

Interim step toward regulatory overhaul

According to SEC staff, state trust companies may serve as qualified custodians if they implement procedures to safeguard crypto assets and advisers perform due diligence to ensure the arrangements serve clients’ best interests. The decision comes as the agency prepares to propose amendments to custody rules under the Investment Advisers Act and Investment Company Act, which currently restrict custody to banks and other approved entities.

Commissioner Hester Peirce welcomed the decision, calling it a way to remove the “guessing game” for advisers and regulated funds. She emphasized that the guidance not only covers client-held crypto assets but also tokenized securities, suggesting it could pave the way for modernized, principles-based custody rules.

Support and pushback from stakeholders

Industry voices have praised the SEC’s stance. Bloomberg ETF analyst James Seyffart described the letter as “a textbook example of more clarity for the digital asset space,” while pseudonymous trader Marty Party predicted it would spark growth in crypto custodians, boosting adoption.

However, the SEC’s lone Democrat commissioner, Caroline Crenshaw, pushed back, arguing that bypassing the traditional rulemaking process undermines fairness and economic analysis. She warned that state trust companies now gain an advantage over applicants pursuing federal charters from the Office of the Comptroller of the Currency.

 

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