No-action letter marks shift in custody rules for digital assets
The U.S. Securities and Exchange Commission (SEC) has signaled greater flexibility toward cryptocurrency custody by permitting investment advisers to use state trust companies as custodians. The SEC’s Division of Investment Management issued a no-action letter, confirming it would not recommend enforcement if advisers rely on such entities to safeguard digital assets.
Key Interim Step for Crypto Custody
The guidance follows a request from law firm Simpson Thacher & Bartlett, which sought assurances for financial institutions, including venture capital firms, that custodying digital assets through state trust companies would not trigger enforcement actions.
Division Director Brian Daly described the move as “an interim step to a longer-term modernization of our custody requirements.” He added that the change “unlocks a larger universe of crypto custody options, subject to important safeguards.”
Bloomberg ETF analyst James Seyffart called the decision “a textbook example of more clarity for the digital asset space”, while crypto trader Marty Party predicted it would encourage “many more crypto custodians,” boosting adoption.
Wyoming Senator Cynthia Lummis also praised the development, pointing out that her state recognized trust companies as digital asset custodians as early as 2020.
Industry Reactions and Support
The letter has been welcomed by several industry voices. SEC Commissioner Hester Peirce said the move ends the “guessing game” advisers have faced when selecting custodians for crypto assets. She noted it will benefit advisory clients and fund shareholders, particularly as tokenized securities become more common.
Opposition Within the SEC
Not everyone supports the move. SEC Commissioner Caroline Crenshaw criticized the decision, warning it creates a “troubling hole” in existing custody rules. She argued that such changes should come through formal rulemaking, with public input and economic review.
“With today’s action, state trust companies can bypass the entire OCC application process in which others are participating conscientiously,” Crenshaw said.
The SEC has already indicated plans to propose broader amendments to custody rules under the Investment Advisers Act and Investment Company Act. For now, the no-action letter is being seen as a practical step toward modernizing crypto custody frameworks — a move many believe will accelerate mainstream adoption of digital assets.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.