SEC Permits Investment Advisers to Use Chartered Trusts as Crypto Custodians

Highlights:

• SEC declares state-chartered trusts can now safely hold crypto for investors.
• Clear rules give crypto companies and investors more trust and confidence ahead.
• Leaders praise SEC move, noting it brings clearer guidance for crypto custody.

On Tuesday, the U.S. Securities and Exchange Commission (SEC) said it will not penalize investment advisors, crypto fund managers, or other organizations that use state-chartered trusts as qualified custodians for crypto assets.

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Some organizations under the Investment Advisers Act of 1940 and its rules can act like ‘banks’ for crypto. They can hold and manage crypto assets, plus the cash or equivalents needed for transactions. In other words, registered advisers and regulated funds using a state-approved trust may store and handle cryptocurrencies like Bitcoin and Ethereum just like regular cash.

🚨BREAKING: The @SECGov has issued a no-action letter saying that investment advisers can use state-chartered trust companies as qualified custodians for crypto assets.

What does this mean?

Under the Investment Advisers Act of 1940, advisers must keep client assets with a…

— Eleanor Terrett (@EleanorTerrett) September 30, 2025

On September 30, Simpson Thacher & Bartlett LLP sent a letter to the SEC asking for confirmation that Registered Advisers and Regulated Funds could safely use state-chartered trust companies to hold crypto assets. The SEC later issued a no-action response, giving firms clarity on how to manage digital assets legally.

The SEC’s recent letter shows a change from the stricter rules under former Chair Gary Gensler. He had tried to limit which organizations could hold digital assets. In July, current Chair Paul Adkins launched “Project Crypto.” This initiative aims to reduce rules for the crypto industry and help digital assets join the U.S. economy faster.

SEC Guidance Clarifies Crypto Custody Rules

This guidance allows companies like Ripple and Coinbase to become qualified crypto custodians. Advisers are required to review audited financial statements and independent accountants’ reports. Custody agreements must not allow lending, pledging, or rehypothecating crypto without client consent, and client assets must remain separate from the custodian’s own funds.

The rules apply only to state trust companies authorized by banking regulators to provide crypto custody services. These companies must follow licensing rules, maintain minimum capital, undergo regular inspections, and face penalties if they fail to comply. Overall, this move signals a regulatory thaw, providing the crypto industry with clearer rules and more confidence to grow safely in the U.S. financial system.

Industry Leaders Welcome the Move

Senator Cynthia Lummis posted on X that she is happy to see the SEC recognize state-chartered trusts as qualified crypto custodians. She said Wyoming led the way in 2020 with its own no-action relief, which the SEC had criticized back then. She added that the SEC now sees the value and strict standards of Wyoming’s crypto supervision. 

Encouraged to see @SECGov recognizing state-chartered trust companies as qualified digital asset custodians. WY paved the way in 2020 by issuing landmark no-action relief, & was criticized by SEC staff. They finally recognized the rigor & value of WY's digital asset supervision. pic.twitter.com/VLJcNwicJx

— Senator Cynthia Lummis (@SenLummis) September 30, 2025

Brian Daly, Director of the SEC’s Division of Investment Management, told Eleanor Terrett that, “This additional clarity was needed because state-chartered trust companies were not universally seen as eligible custodians for crypto assets.”

Bloomberg Intelligence analyst James Seyffart noted on X that this could serve as a clear example of improved guidance for the digital asset industry. He said the sector had hoped for this clarity in recent years and expected more.

This is a textbook example of more clarity for the digital asset space. Exactly the sort of thing the industry was asking for over the last few years. And it keeps coming. https://t.co/vIA9XQ0XMU

— James Seyffart (@JSeyff) September 30, 2025

The development appears to signal a softer stance between crypto companies and U.S. federal regulators. Reports indicate that initiatives like “Operation Choke Point 2.0” involved agencies such as the Federal Reserve, the Office of the Comptroller of the Currency, and the U.S. Treasury, which aimed to define the limits of their regulatory actions concerning cryptocurrency businesses.

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