SEC allows investment advisers to use chartered trust companies as crypto custodians
The US SEC is allowing investment advisors to rely on chartered trust companies as crypto custodians.
This means that any officially approved or licensed trust company can hold cryptocurrencies like Bitcoin or Ether in the same way they hold hard cash or other assets.
The American financial watchdog disclosed the update in a letter sent to Simpson Thacher & Bartlett LLP, a law firm that reached out to the SEC, seeking clarification.
SEC supports state-trusts as crypto custodians
The Securities and Exchange Commission stated in the letter that trust companies may be treated as “banks.” The approach works under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. State-chartered trust companies are now eligible to hold crypto assets on behalf of their clients.
The SEC shared the letter and analysis on its website. The agency wrote,
“…any Registered Adviser that has custody of client funds or securities maintain those funds and securities with a qualified custodian, where “qualified custodian” is defined to include “a bank as defined in Section 202(a)(2) of the Advisers Act.”
The SEC letter is classified as a no-action letter, meaning that the agency will not take enforcement action if advisers or funds use state trust companies to hold crypto assets.
Senator Cynthia Lummis posted on X and said that she is “encouraged to see @SECGov recognizing state-chartered trust companies as qualified digital asset custodians.” She reminded people of how Wyoming paved the way for this decision when it issued a no-action relief in 2020 and was criticized back then by SEC employees. She said, “They finally recognized the rigor & value of WY’s digital asset supervision.”
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.”
Daly explained that the letter to Simpson Thacher & Bartlett is a staff letter. He said the topic could be brought up in future rulemaking, but for now, it works and provides clear guidance for today’s products and managers.
The decision taken by the SEC staff is a turning point, especially after the Federal Reserve and the Treasury Department restricted how banks and regulated entities could work with crypto firms in what is known as Operation Choke Point 2.0.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Blockchain’s $6.8 Billion Bet: Will Advancements Outpace Its Security Risks?
- Terminal Finance's collapse exposed blockchain fintech vulnerabilities from delayed tech adoption and security flaws, triggering sector-wide scrutiny. - Naver-Upbit's $6.8B AI-blockchain merger faces challenges after Upbit's $36M Solana breach, mirroring 2019 North Korean-linked attacks. - Balancer's $116M hack revealed systemic DeFi risks, with debates over audit efficacy despite 11 prior security reviews. - Binance's legal troubles and BNB's price slump highlight market skepticism, while initiatives li

Bitcoin News Update: Krugman Links Bitcoin's Decline to Waning 'Trump Trade' Hype
- Bitcoin's 30% drop from October peak linked to fading "Trump trade" speculation, per Nobel laureate Paul Krugman, who frames it as speculative rather than stable value. - BlackRock's IBIT ETF regained $3.2B profit post-$90K rebound, while SpaceX's $105M BTC transfer sparks custodial strategy debates amid market volatility. - Naver's $10B Dunamu acquisition and corporate Bitcoin treasury moves highlight institutional crypto integration, despite $19B industry selloff and regulatory challenges. - Prediction

Bitcoin News Today: "Conflicting Whale Strategies Cast Uncertainty on Bitcoin's Path to $100K"
- Bitcoin's drop below $100,000 coincided with mixed whale strategies, including accumulation, shorting, and exchange deposits, signaling uncertain market direction. - Ethereum whales used 16.08 million DAI to buy 5,343 ETH at $3,010, while Bitcoin whales deposited 9,000 BTC, potentially signaling selling preparation. - Derivatives markets showed conflicting bets, with a $91M BTC short and $36.4M long flip, while ETF inflows ($84M total) hinted at institutional confidence amid macroeconomic risks. - Analys

Exchanges Call on SEC: Deny Exemptions to Maintain Fairness in the Market
- WFE warns SEC against broad crypto exemptions for tokenized stocks, citing risks to investor protections and market integrity. - Tokenized stocks lack dividend rights, voting access, and custody frameworks, creating "mimicked products" with weaker safeguards. - SEC's sandbox-style exemptions risk regulatory arbitrage, allowing crypto platforms to bypass rules enforced on traditional exchanges. - Global bodies like IOSCO warn tokenization amplifies data integrity and custody risks, urging unified standard

