Overview

• The SEC’s Division of Investment Management said on Sept. 30 it would not recommend enforcement if registered advisers and regulated funds treat state‑chartered trust companies as banks for holding crypto assets.
• Advisers must determine the setup is in clients’ best interest and verify the trust’s state authorization, GAAP‑audited financials, independent control reports, private‑key safeguards, asset segregation, and a ban on rehypothecation without client consent.
• The guidance creates a pathway for state‑trust affiliates of major firms, including Coinbase, Ripple’s Standard Custody, and BitGo, to serve as qualified custodians for regulated clients.
• The letter responds to a request from Simpson Thacher & Bartlett and carries no legal force, with staff emphasizing it does not alter law and could be revisited through future rulemaking.
• SEC Commissioner Caroline Crenshaw opposed the approach, warning that relying on state trusts risks a “50‑state regulatory roulette” and raises procedural concerns about using staff relief instead of formal rules.