What happened? The SEC said it won’t pursue enforcement for now against advisers and funds that use state‑chartered trust companies to custody crypto, under certain conditions.
The SEC’s Division of Investment Management issued a no‑action letter saying state‑chartered trust companies can be treated as “qualified custodians” for digital assets if they’re authorized by their state, have audited financials, and maintain strong internal controls. That gives advisers and registered funds temporary clarity to place client crypto and related cash with those trusts without breaching federal custody rules. The agency warned this isn’t formal rulemaking and the position could change if facts differ or if new custody rules are adopted.
Who does this affect? Investment advisers, registered funds, state trust custodians, and crypto custody providers are the main parties impacted.
Advisers and regulated funds now have a clearer pathway to custody client crypto with state‑chartered trusts but must do due diligence to ensure those trusts meet the SEC’s conditions. State‑chartered trust companies and crypto custody firms (for example, Coinbase, BitGo, and others) could see more business if they can demonstrate compliance and strong controls. End investors, plan sponsors, and asset managers may also benefit from more custody options and potentially expanded product offerings.
Why does this matter? It widens custody options, could boost institutional participation, and may shift market flows toward regulated custodians.
Opening the pool of acceptable custodians increases competition, which can lower custody costs and make it easier for managers to offer crypto exposure to clients. That could attract more institutional capital and retirement‑type flows into crypto products, improving liquidity and market depth. But because the guidance is temporary and not formal rulemaking, some firms may wait for firmer rules before making big investments, so the full market impact will unfold gradually.