SEC Opens Door for Advisers to Use State Trusts as Crypto Custodians

In a notable shift, the U.S. Securities and Exchange Commission has issued a no‑action letter allowing investment advisers to use state‑chartered trust companies to custody digital assets. This development effectively recognizes certain state‑trust entities as qualified custodians for cryptocurrencies, under specific conditions.

The letter clarifies that, for purposes of the Investment Advisers Act of 1940, state trust companies meeting requisite regulatory standards may be treated akin to banks in holding and maintaining crypto assets and the cash or cash equivalents needed to facilitate transactions. This marks a meaningful regulatory accommodation in an area long burdened by ambiguity over custody rules.

Industry observers responded positively to the guidance, viewing it as the kind of clarity market participants have long requested. Bloomberg Intelligence analyst James Seyffart praised the move as “textbook” regulatory certainty that supports innovation and investor protection simultaneously. Meanwhile, some critics warn that the SEC must still define boundary conditions for state trusts to ensure they meet standards for control, segregation, and insolvency protection.

Overall, by opening the door to state‑chartered trust custodians, the SEC is signaling a more flexible posture toward digital asset custody frameworks. Whether this leads to broad adoption among adviser firms, and how precisely those state trusts will need to structure their operations, remains to be seen.

In a complementary development, the SEC also approved generic listing standards for crypto exchange‑traded funds, allowing eligible ETFs to be listed without undergoing individual, case‑by‑case SEC review. Under the new rules, exchanges like Nasdaq, NYSE Arca, and Cboe can list spot crypto or commodity‑based funds if they meet criteria such as trading on an ISG‑member market, having futures contracts traded for at least six months, or being tied to an ETF with at least 40 % exposure. This change shortens the approval window from several months to roughly 75 days, dramatically accelerating product launches.