The SEC’s decision to permit state-chartered trust companies to act as crypto custodians is a significant development in the digital asset sector. This move, confirmed through a no-action letter, marks a pivotal moment for financial advisers who can now leverage state trusts to securely manage crypto assets.
Understanding the SEC’s Reversal
In an unexpected turn, the U.S. Securities and Exchange Commission has allowed investment advisers, under the Investment Advisers Act of 1940, to use state-chartered trust companies as qualified custodians for crypto assets. This decision offers a new framework for handling cryptocurrencies like Bitcoin and Ethereum, akin to traditional cash management.
Impact on Financial Entities
Registered advisers and regulated funds can now operate with a State Trust Company to hold and manage cryptocurrencies. This shift provides a clearer regulatory environment, which the industry has long sought. Bloomberg Intelligence analyst James Seyffart noted that this decision brings much-needed clarity to the digital asset space.
The SEC’s approach aligns with the industry’s call for well-defined guidelines, facilitating a more stable and predictable environment for crypto firms and investors.
Regulatory Thaw in the Crypto Space
This decision is part of a broader regulatory shift. Previously, initiatives like “Operation Choke Point 2.0” aimed to limit the activities of regulated agencies concerning crypto firms. However, the latest SEC letter, dated September 30, 2025, shows a willingness to adapt and recognize the role of state trusts in the crypto ecosystem.
Legal Clarity for Crypto Assets
Simpson Thacher & Bartlett LLP’s request for the SEC’s confirmation highlights the necessity of legal clarity. By allowing state Trust Companies to serve as custodians without enforcement action, the SEC is supporting the burgeoning crypto market. This development reduces legal ambiguity, empowering financial firms to manage digital assets confidently.
Senator Cynthia Lummis praised the SEC’s recognition of state-chartered trust companies as qualified custodians. She emphasized the importance of Wyoming’s early efforts in digital asset supervision, which laid the groundwork for this regulatory acceptance.
The SEC’s decision represents a positive step in acknowledging the evolving financial landscape. It underscores the importance of adapting regulatory frameworks to accommodate the unique challenges and opportunities presented by cryptocurrencies.
Ultimately, this move by the SEC aims to foster innovation while ensuring the safety and security of digital asset transactions, paving the way for further growth in the crypto industry.
Disclaimer: The Block remains an independent media outlet, providing news, research, and data. As of November 2023, Foresight Ventures, a major investor in The Block, continues to influence the crypto space. Crypto exchange Bitget is also a key player in this ecosystem.
