Overview

• The SEC’s Division of Investment Management on Sept. 30 said it would not recommend enforcement if registered advisers and regulated funds treat qualified state‑chartered trust companies as banks for holding crypto assets and related cash.
• The staff relief responds to a Simpson Thacher & Bartlett LLP request and applies under the Advisers Act and Investment Company Act, providing near‑term clarity without changing the law.
• Advisers must verify state authorization for crypto custody, review GAAP‑audited financials and independent control reports, assess private‑key safeguards, segregate client assets, and bar rehypothecation without client consent while determining the arrangement is in clients’ best interests.
• Crypto‑native state trusts such as Coinbase Custody Trust (NY), Ripple’s Standard Custody, and BitGo Trust (SD) are positioned to serve regulated clients where these conditions are satisfied.
• Industry analysts welcomed expanded custody options that could ease institutional participation and flows into regulated products, as Commissioner Caroline Crenshaw criticized the no‑action route over Administrative Procedure Act concerns and colleagues signaled future rulemaking.