The SEC just made a move that could make life a little easier for crypto firms. Its Division of Investment Management put out a no-action letter saying it’s not going to crack down on advisers or funds that use state-chartered trust companies to hold crypto.
That’s a pretty big deal, especially considering how rigid things have been up until now. It gives firms more options for storing digital assets without worrying about stepping on a regulatory landmine.
What the No-Action Letter Actually Says
Here’s what the letter actually lays out. If a state trust company is properly set up to handle crypto, and it follows a list of rules, then advisers and funds can treat it the same way they would a traditional bank when it comes to custody.
SEC’S DIVISION OF INVESTMENT MANAGEMENT ISSUES NO-ACTION LETTER ALLOWING INVESTMENT ADVISERS TO USE STATE TRUST COMPANIES AS CRYPTO CUSTODIANS WITH PROPER PROCEDURES. pic.twitter.com/UXmM1q2yGQ
— Flux Charts (@FluxCharts) October 1, 2025
That means the trust has to be officially allowed to hold crypto, must have written protections in place, and needs to keep client assets fully separate from its own. Also, it can’t touch those assets without clear permission. The letter doesn’t rewrite any laws, though. It just says the SEC staff won’t go after you if you play by these rules.
Why This Matters for Custody
The reason this is important is that until now, the options for storing crypto under the official rules have been pretty limited. Most firms had to work with banks or broker-dealers, which doesn’t always work well when you’re dealing with digital assets.
Many crypto-native custodians don’t fit into those old categories. So by giving state trust companies a chance to step in, the SEC is basically saying, “Okay, maybe there’s another way to do this.” It could open the door for more firms to handle custody without bending over backwards.
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Safeguards the SEC Requires
Of course, there are strings attached. Advisers still need to do their homework. The trust company has to be properly licensed and needs strong protections in place for handling things like private keys.
It also needs to clearly agree that it won’t borrow or mix up client assets. All of that has to be written into the contract. On top of that, advisers have to decide whether using that trust company is actually a good move for their clients. So yeah, it’s flexible, but not a free-for-all.
Reactions and a Warning from a Commissioner
Not everyone is throwing a party. While some people in the industry are happy to finally see the SEC give a little clarity, others are raising red flags. Commissioner Caroline Crenshaw came out hard against it.
She thinks this skips the proper process, lacks good data, and might even weaken the protections that are supposed to be there for investors. Her main point is that this could lead to inconsistent rules, and clients could end up paying the price.
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What This Means for Crypto Firms
For crypto firms, this could be a real opening. Especially for those state-chartered trust companies tied to bigger players. If they can check all the right boxes, they might finally be able to step into the custody game. A lot of firms that were locked out before could now have a shot. But they’ll still need to bring their A-game and follow everything by the book.
What to Watch Next
So what now? This letter could just be the first step. We’ll have to see if the SEC decides to turn this into an official rule. It’ll also be interesting to watch how state trust companies react. Will they invest in better systems and tighten up compliance?
And will advisers actually take them up on this path? If the usual custodians stay expensive or slow, we might see more firms take this route. Either way, things could get interesting.
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