The SEC’s Division of Investment Management said it does not plan to take enforcement action against registered advisers or regulated funds that use state-chartered trusts as custodians for crypto assets, provided the trust meets banking authority oversight and written custody controls. This opens custody options beyond banks for crypto funds. State-chartered trusts can serve as qualified custodians for crypto when authorized and properly governed. Advisers must verify regulatory authorization, segregation of assets, and written private key controls. Bloomberg analyst praise and SEC language suggest broader industry adoption potential; official SEC letter remains non-binding. Meta description: SEC guidance on state-chartered trust custody opens new custodian options for crypto funds—learn what advisers must verify to use these trusts today. { "@context": "https://schema.org", "@type": "NewsArticle", "mainEntityOfPage": { "@type": "WebPage", "@id": "https://en.coinotag.com/crypto/SEC-state-trust-custody-guidance" }, "headline": "SEC Letter Signals State-Chartered Trusts May Be Used for Crypto Custody Under Conditions", "description": "The SEC Division of Investment Management said it would not recommend enforcement action against advisers using state-chartered trusts as custodians for crypto assets if specific safeguards are met.", "author": { "@type": "Organization", "name": "COINOTAG" }, "publisher": { "@type": "Organization", "name": "COINOTAG", "logo": { "@type": "ImageObject", "url": "https://en.coinotag.com/static/logo.png" } }, "datePublished": "2025-10-01T09:00:00Z", "dateModified": "2025-10-01T09:00:00Z"} What does the SEC letter say about state-chartered trust custody for crypto? SEC guidance on crypto custody states the Division of Investment Management will not recommend enforcement action against Registered Advisers or Regulated Funds that treat a state-chartered trust as a “bank” for placement and maintenance of crypto assets, provided the trust is authorized by banking authorities and maintains written policies for custody and private key management. How must advisers verify a state trust to use it as a qualified custodian? Advisers must confirm the state trust is authorized by the relevant banking regulator to provide crypto custody services. They should review written policies on private key management, segregation of client assets, and contractual guarantees that the trust will not lend or use client funds without consent. { "@context": "https://schema.org", "@type": "HowTo", "name": "How advisers can evaluate state-chartered trusts for crypto custody", "step": [ { "@type": "HowToStep", "name": "Confirm regulatory authorization", "text": "Verify the trust is authorized by state banking authorities to provide crypto custody services and that authorization covers the specific assets." }, { "@type": "HowToStep", "name": "Assess custody policies", "text": "Require written policies for private key custody, access controls, incident response, and segregation of client assets." }, { "@type": "HowToStep", "name": "Secure contractual protections", "text": "Include provisions preventing the trust from lending or using client assets and ensure segregation from the trust's own assets." }, { "@type": "HowToStep", "name": "Document best interest determination", "text": "Document that using the state trust is in the best interest of the RIA client or regulated fund and its shareholders." } ]} The SEC letter is an interpretive response and does not create binding law. The memorandum clarifies enforcement priorities but leaves the ultimate legal standards of the Investment Advisers Act of 1940 intact. Why does this matter for crypto firms and custodians? Opening custody to state-chartered trusts could broaden the pool of qualified custodians beyond national banks. That potentially allows affiliates of crypto-native firms and specialized trust companies to custody assets for registered products when they meet oversight and policy requirements. What conditions did the SEC emphasize in the letter? The SEC emphasized that custodial agreements must ensure segregation of crypto assets, explicit limits on use of funds, documented private key controls, and that the adviser determines the trust arrangement serves client interests. The agency reiterated the letter has “no legal force or effect.” Frequently Asked Questions { "@context": "https://schema.org", "@type": "FAQPage", "mainEntity": [ { "@type": "Question", "name": "Can a registered investment adviser rely on a state-chartered trust for crypto custody?", "acceptedAnswer": { "@type": "Answer", "text": "Yes, the SEC's Division of Investment Management said it would not recommend enforcement action in those circumstances when the state trust is authorized by banking authorities and maintains appropriate custody policies and segregation." } }, { "@type": "Question", "name": "Does the SEC letter change the law?", "acceptedAnswer": { "@type": "Answer", "text": "No. The letter is guidance and has no legal force; advisers must still comply with the Investment Advisers Act of 1940 and applicable state and federal laws." } }, { "@type": "Question", "name": "What should advisers require in custodial agreements?", "acceptedAnswer": { "@type": "Answer", "text": "Agreements should require asset segregation, restrictions on lending or using client assets, written private key management policies, and regulatory authorization evidence." } } ]} What do industry observers say? Bloomberg ETF analyst James Seyffart praised the letter as added clarity for the digital asset space. Industry commentary from major crypto firms such as Coinbase and Ripple (plain text mentions) indicates the guidance could increase custodial competition. Key Takeaways Regulatory clarity : The SEC letter signals tolerance for state-chartered trust custody when safeguards are present. Adviser responsibility : Registered Advisers must verify authorization, policies, and contractual protections. Non-binding guidance : The letter is interpretive and does not change statutory legal obligations; due diligence remains essential. Conclusion The SEC’s interpretive letter provides practical guidance on using state-chartered trusts as custodians for crypto assets and may expand custodian options if trusts meet oversight and custody standards. Advisers should document their due diligence and ensure contractual protections; market adoption will depend on state authorization and robust custody controls.
