SEC Issues Guidance on Crypto Asset Custody
The SEC allows investment advisers to use state-supervised trust companies for holding digital assets as of September 30, 2025.
Updated on Oct. 28, 2026 in Investing
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On September 30, 2025, the SEC Division of Investment Management issued a no-action letter permitting registered investment companies to treat state-supervised trust companies as banks for crypto custody. This regulatory shift allows firms to utilize specialized trust entities to hold digital assets while maintaining federal oversight compliance.
Why it matters
This policy provides a clearer path for financial institutions to integrate digital assets into client portfolios by leveraging state-regulated infrastructure. It ensures that advisers can maintain fiduciary standards while utilizing specialized custodians for crypto-asset holdings.
The SEC letter references compliance obligations under Section 206(4) of the Investment Advisers Act and Sections 17(f) and 26(a) of the Investment Company Act. Firms must ensure these entities adhere to strict fiduciary requirements.
The players
SEC Division of Investment Management
This division of the Securities and Exchange Commission is responsible for administering the federal securities laws as they apply to investment companies and investment advisers.
The details
Advisers must confirm that state trust companies are subject to bank-level supervision and hold proper fiduciary authority under state law. Agreements must explicitly prohibit the trust company from lending, pledging, or hypothecating client assets to ensure client protection.
Timeline
September 30, 2025: The SEC Division of Investment Management issued the no-action letter regarding crypto asset custody.
Market Dynamics
This guidance represents a significant integration of traditional financial regulation with the emerging digital asset ecosystem. It aligns with the long-term trend of bringing crypto custody under established federal oversight frameworks similar to those used for securities.
Retail investors may see more financial institutions offering cryptocurrency services as advisers gain regulatory clarity on custody. This change allows for safer management of digital assets within professional investment accounts.
The takeaway
Investors should ensure that any firm managing their digital assets has fully vetted its custodial partners for compliance with these updated SEC requirements. Transparency remains the best protection when choosing how to hold volatile assets in a managed portfolio.
Further reading
For broader trends regarding digital assets, explore more on Investing.
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Do you trust state-regulated trust companies to securely manage and protect your digital assets?
