The U.S. Securities and Exchange Commission (SEC) has made a significant move towards expanding crypto custody options by indicating that state-chartered trust companies can safely hold digital assets. This development comes through a no-action letter from the SEC, which assures that registered advisers and funds can park their digital assets in state trusts without worrying about enforcement actions.
This decision appeared amidst ongoing discussions within the SEC about the rules governing crypto custody, which have been contentious under the leadership of both previous and current chairs. The prior SEC chair, Gary Gensler, had proposed rules that would restrict the types of firms allowed to handle investor assets, aiming to enhance investor safety. However, under the current chair, Paul Atkins, the agency is embracing a more crypto-friendly stance, stating that establishing clear policies for the industry is a priority.
While the no-action letter does not formalize rules, it alleviates immediate compliance concerns for firms that deal with state-chartered trusts. The letter suggests that the SEC views these trust companies as equivalent to banks regarding custody of crypto assets, a shift from the previous leadership’s perspective that deemed crypto firms too risky and poorly regulated.
Commissioner Hester Peirce supported the move, advocating for the re-evaluation of current rules to accommodate technologically competent firms that might handle custody in-house. Conversely, Democratic Commissioner Caroline Crenshaw criticized the no-action approach, arguing that it sets a dangerous precedent by treating crypto differently from other financial sectors and effectively allows a fragmented state-by-state regulatory system.
This step is part of a broader initiative from the SEC, known as Project Crypto, which seeks to establish more comprehensive regulations for digital asset markets in the U.S. Meanwhile, Congress is also moving forward with legislation to better regulate the digital asset landscape.
For more information, check the SEC’s no-action letter here.
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