SEC Welcomes Advisers to Utilize State Trusts for Cryptocurrency Custody

The US Securities and Exchange Commission (SEC) staff has opened the door for investment advisers to use state trust companies for safeguarding cryptocurrency assets.

In a rare no-action letter, the SEC’s Division of Investment Management announced on Tuesday that it would not recommend enforcement actions against advisers utilizing state trust companies as crypto custodians.

Law firm Simpson Thacher & Bartlett had submitted a letter to the Division on Tuesday, seeking assurances that registered financial entities, including venture capital firms, would not face regulatory actions if they served as custodians of crypto assets.

This marks the second no-action letter from the SEC this week, highlighting the agency’s relaxed approach to crypto regulation during the Trump administration, which aims to attract companies and projects to the US by easing oversight.

Interim measure toward broader reforms

SEC staff explained in the letter that state trust companies can act as custodians, provided they implement procedures that safeguard cryptocurrency, and that advisers and fund managers adhere to specific criteria, such as conducting due diligence and ensuring client interests are prioritized.

Brian Daly, director of the Division of Investment Management, stated in a message to Cointelegraph that the letter is an “interim step toward a longer-term modernization of our custody requirements.”

“This relief opens up a wider array of options for crypto custody, reinforced by essential safeguards.”

The SEC indicated in its regulatory agenda that it intends to propose revisions to custody rules. Current regulations under the Investment Company Act and the Investment Advisers Act mandate that client assets be held by a designated list of qualified custodians, such as banks.

Support from Peirce and analysts

SEC Commissioner Hester Peirce noted that the guidance removes the “guessing game” that registered advisers and supervised funds have had to navigate when selecting entities for crypto asset custody, ultimately benefiting advisory clients and fund shareholders.

She highlighted that this guidance encompasses client crypto assets held by registered advisers and regulated funds, as well as tokenized securities.

“This moment also provides an opportunity to evaluate whether the custody criteria for registered advisers and regulated funds should be updated and modernized, potentially through principles-based regulations.”

Bloomberg ETF analyst James Seyffart praised the decision in a post on X, describing it as a “textbook example of the clarity the digital asset sector has been seeking over the past few years.”