The U.S. Securities and Exchange Commission (SEC) has issued a pivotal “no-action” letter, stating that investment advisors can utilize state trust companies as qualified custodians for cryptocurrencies. Dated September 30, 2025, this letter seeks to address the enduring uncertainty surrounding custody at the federal level, thereby facilitating enhanced management of cryptocurrencies like Bitcoin and Ethereum by financial institutions.
State Trusts’ New Role in Crypto Custody
Under the 1940 Investment Company Act, the SEC’s decision affirms that registered investment advisors and regulated funds can hold cryptocurrencies and cash through state trust companies. These entities are permitted to safeguard and handle cryptocurrencies in a manner akin to cash or cash‑equivalent instruments. James Seyffart, an analyst at Bloomberg Intelligence, regards the SEC’s determination as the much‑needed clarity awaited by the sector, underscoring the significant assurance bestowed upon the cryptocurrency market.
The core of the ruling arises from an official petition by Simpson Thacher & Bartlett LLP submitted to the SEC. The letter requested assurance that investment advisors and funds using state trust companies would not face punitive consequences. The SEC’s stance signals a softening in the stringent posture that regulatory bodies have maintained for years. During the Operation Choke Point 2.0 process, numerous federal entities curtailed financial services access for cryptocurrency firms.
Political and Legal Echoes of the SEC Decision
Political support is evident with U.S. Senator Cynthia Lummis of Wyoming expressing approval on her social media, highlighting her state’s pioneering 2020 regulations for cryptocurrency trusts. Lummis values the SEC’s acknowledgment of Wyoming’s oversight model, suggesting a broader acceptance of the state’s regulatory innovations.
State trusts stand out due to their infrastructure adept at handling complex custody processes for cryptocurrencies. Official recognition of these institutions could ease access for institutional investors to cryptocurrencies on a broader scale. Moreover, this regulatory clarity could catalyze the launch of numerous financial products and funds previously on hold.
The SEC’s move is viewed as a crucial threshold in safeguarding investors and providing legal assurance within the digital finance ecosystem. Experts believe this may expedite integration between banks, trusts, and investment funds in the forthcoming era.