The U.S. Securities and Exchange Commission (SEC) has said it will not pursue enforcement action against investment advisers and registered funds that use state-chartered trust companies to custody crypto assets, providing temporary clarity in a sector that has long operated in regulatory uncertainty.
In a letter issued on September 30, the SEC’s Division of Investment Management responded to a request from Simpson Thacher & Bartlett LLP on behalf of financial advisers.
The letter confirmed that, for now, state-chartered trusts may be treated as “banks” under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 when safeguarding digital assets.
Advisers Get Green Light to Store Client Crypto With State Trusts
The decision means investment advisers and regulated funds may place client crypto holdings and related cash with such entities without breaching federal custody rules.
The no-action position is significant because advisers under federal law must use a “qualified custodian” to hold client assets, typically a national bank or trust company with recognized fiduciary powers. Until now, state-chartered trust companies were not universally viewed as eligible custodians for crypto assets.
The SEC’s guidance comes with conditions. Advisers must conduct due diligence to ensure the state-chartered trust is authorized by its state banking authority to provide crypto custody, maintains audited financial statements, and has internal controls verified by independent accountants.
They must also confirm that the trust follows strict policies to protect private keys, segregate client assets, and prohibit rehypothecation without client consent.
The letter emphasized that the SEC’s stance does not constitute formal rulemaking. “Our letter provides our position on enforcement action only and does not provide any legal conclusions,” wrote Taylor Evenson, senior counsel in the Division of Investment Management.
He added that the position could change if facts differ or if the Commission pursues new custodial rules currently under consideration. Market analysts said the move could broaden the crypto custody market.
BREAKING: The @SECGov has issued a no-action letter saying that investment advisers can use state-chartered trust companies as qualified custodians for crypto assets.
What does this mean?
Under the Investment Advisers Act of 1940, advisers must keep client assets with a…
— Eleanor Terrett (@EleanorTerrett) September 30, 2025
Bloomberg’s Eleanor Terrett noted that advisers and funds now have clearer assurance they can use state trust companies, which opens the door to greater participation from firms such as Coinbase, Ripple’s Standard Custody, BitGo, and WisdomTree.
Brian Daly, director of the Division of Investment Management, said the additional clarity was necessary to address doubts about whether state-chartered trusts qualified.
Industry reaction has been largely positive. ETF analyst James Seyffart described the letter as “a textbook example of more clarity for the digital asset space,” adding that it reflects the type of regulatory guidance firms have sought for years.
This is a textbook example of more clarity for the digital asset space. Exactly the sort of thing the industry was asking for over the last few years. And it keeps coming. https://t.co/vIA9XQ0XMU
— James Seyffart (@JSeyff) September 30, 2025
Daly also said the guidance was designed to meet current needs. “We believe the market will benefit from having this guidance for today’s products, today’s managers, and today’s issues,” he said.
While the letter provides a near-term path for advisers, it stops short of providing long-term certainty. The SEC stressed that all existing custody requirements remain in force and that future rulemaking could revisit the treatment of crypto custody under federal law.
SEC Signals Major Policy Shift Under Chair Paul Atkins, Softening Stance on Crypto
The SEC is showing a major policy shift, moving away from the lawsuit-heavy approach of its previous administration and toward a more collaborative framework for crypto and corporate oversight.
SEC Chair Paul Atkins, who took office in April, said the agency will issue preliminary notices of potential technical violations before pursuing enforcement, giving companies up to six months to respond.
“You can’t just suddenly come and bash down their door,” Atkins said, criticizing the enforcement-first approach of former chair Gary Gensler.
SEC softens stance with warning notices before crackdowns, while Trump pushes an SEC shakeup and UK–US unite on stablecoins.#Crypto #Regulations https://t.co/OsAJZnw5fm
— Cryptonews.com (@cryptonews) September 19, 2025
During Gensler’s tenure, the SEC pursued lawsuits against Ripple, Binance, Coinbase, and others, cases Atkins said lacked predictability and legal grounding.
Atkins has also rejected the view that most cryptocurrencies qualify as securities. He voiced support for tokenized versions of traditional instruments such as stocks and bonds while dropping several high-profile cases inherited from the Gensler era.
The SEC’s new Crypto Task Force will host a public hearing on October 17 to explore financial privacy and surveillance technologies.
Beyond crypto, the SEC is weighing broader reforms to corporate disclosure rules. On September 19, Atkins confirmed the agency is prioritizing a proposal to give companies flexibility to move from quarterly to semiannual earnings reporting, aligning with a push by President Donald Trump. Republicans currently hold a 3-1 advantage at the agency, boosting the proposal’s chances.
SEC Chairman @secpaulsatkins says the agency is preparing reforms for corporate disclosure rules, which could end mandatory quarterly reporting#SEC #CryptoRegulation https://t.co/1AwEdIW1bj
— Cryptonews.com (@cryptonews) September 19, 2025
The shift coincides with Trump’s August executive order opening the $12.5 trillion 401(k) market to alternative assets, including crypto. Lawmakers are urging the SEC to revise its accredited investor rules to expand access.
Atkins has further signaled an “innovation exemption” for digital asset firms, expected by year-end, that would let new products launch without immediate regulatory burdens.
Together, the changes mark the SEC’s most significant pivot toward crypto since its inception.
The post SEC Greenlights Advisers Using State Trusts as Crypto Custodians — For Now appeared first on Cryptonews.
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