SEC staff open to advisers using trust companies as crypto custodians

The US Securities and Exchange Commission (SEC) has signaled an openness to allowing investment advisers to utilize state trust companies for custody of cryptocurrency assets. In a no-action letter issued by the SEC’s Division of Investment Management, the agency stated it would not pursue enforcement actions against advisers using these state-chartered trust companies as custodians if certain conditions are met. The letter, requested by law firm Simpson Thacher & Bartlett, represents an interim step towards a broader modernization of custody requirements, enabling a wider range of crypto custody options while ensuring important safeguards are followed. SEC Commissioner Hester Peirce highlighted that this guidance removes uncertainty for advisers, ultimately benefiting clients. Meanwhile, SEC Commissioner Caroline Crenshaw expressed concerns, suggesting any modifications to the existing regulations should go through proper rulemaking processes, arguing that the move could disproportionately advantage state trust companies over their national counterparts. The SEC plans to propose amendments to custody rules under existing regulations that apply to client assets held by qualified custodians, including banks.

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