CMC News

#SEC Approves State Trust Companies for #Crypto Custody

The Securities and Exchange Commission has issued a no-action letter permitting investment advisers to use state-chartered trust companies as qualified custodians for digital assets. The Division of Investment Management confirmed it would not recommend enforcement action against advisers utilizing these entities.

Law firm Simpson Thacher & Bartlett submitted a request on Sept. 30 seeking assurances that registered financial institutions could custody crypto assets without regulatory penalties. The firm wanted clarity for registered advisers and regulated funds operating under the Investment Advisers Act of 1940.

The guidance allows certain financial entities to hold and manage cryptocurrencies like $BTC and $ETH, similar to traditional cash holdings. State trust companies must implement procedures designed to safeguard crypto assets while advisers and fund managers perform due diligence to ensure client interests are protected.

Division of Investment Management director Brian Daly described the letter as an interim step toward long-term modernization of #custody requirements. The relief expands available crypto custody options while maintaining important safeguards for client protection.

SEC Commissioner Hester Peirce stated the guidance eliminates the uncertainty that registered advisers and regulated funds have faced when selecting crypto asset custodians. She noted the letter covers client crypto assets held by registered advisers and investments by regulated funds, including #tokenized securities.