In a significant development for the cryptocurrency world, the U.S. Securities and Exchange Commission (SEC) has taken a preliminary step to broaden the scope of crypto custody. This move has opened the door for state-chartered trust companies, including notable crypto players like Coinbase and Kraken, to handle digital assets under certain conditions. The SEC’s recent no-action letter, released by the Division of Investment Management, assures that the agency won’t pursue enforcement actions against SEC-registered advisers and funds that choose to store digital assets with these state trusts.
A New Era for Crypto Custody
The SEC’s no-action letter marks a potential shift in the agency’s approach to cryptocurrency regulation. While it doesn’t constitute a formal rule, the letter provides enough assurance to alleviate immediate compliance concerns for involved firms. It clarifies that the SEC “would not recommend enforcement action” against advisers or funds treating a state trust company as a “bank” for the purposes of crypto asset custody.
This development arrives in stark contrast to the policies during the tenure of former SEC Chair Gary Gensler, who had proposed restricting the types of companies eligible to handle the crypto assets of regulated investment advisers. Gensler’s stance was clear: exchanges like Coinbase needed to be kept at arm’s length. However, the current SEC leadership, under Chairman Paul Atkins, seems to be steering towards a more crypto-friendly environment, aligning with the priorities set by pro-crypto President Donald Trump.
Diverging Views Within the SEC
The no-action letter has sparked a debate within the SEC. Commissioner Hester Peirce, a known advocate for the crypto industry, emphasized the need to update rules governing custodians for registered investment advisers and companies. In a speech in Singapore, she suggested that technologically savvy companies might be well-suited to manage their own custody operations.
On the other hand, Democratic Commissioner Caroline Crenshaw, who had previously supported Gensler’s approach, criticized the no-action treatment. She expressed concerns about the SEC treating cryptocurrency differently from the rest of the financial sector, arguing that it creates an uneven regulatory landscape. Crenshaw warned against bypassing a formal rule-making process that includes public comment and economic analysis, suggesting that such actions might violate the Administrative Procedure Act.
The Broader Regulatory Landscape
This latest SEC move is part of a broader initiative known as Project Crypto, spearheaded by Chairman Atkins. The project aims to establish comprehensive crypto regulations, with formal rules expected to be issued in the coming months. Meanwhile, Congress is also making strides in crafting legislation to regulate the U.S. digital assets markets more thoroughly.
While the no-action letter is a preliminary step, its implications are significant. It provides a temporary reprieve for firms like Coinbase and Kraken, allowing them to continue operations without the looming threat of regulatory action. However, the debate within the SEC illustrates the complexities of integrating cryptocurrency into the broader financial regulatory framework.
Looking Ahead
The SEC’s decision to permit state-chartered trust companies to act as custodians for digital assets could signal a more inclusive regulatory stance towards cryptocurrency. Yet, it remains a contentious issue, with divergent views on the best path forward. As the SEC works towards formalizing its crypto policies and Congress advances on related legislation, the industry will be watching closely to see how these developments unfold.
In the interim, companies operating within this space must navigate a patchwork of state regulations, as highlighted by Commissioner Crenshaw. This “50-state regulatory roulette,” as she described it, underscores the need for a harmonized federal approach to crypto regulation.
As the landscape continues to evolve, stakeholders from all sides will need to engage in ongoing dialogue to ensure that the burgeoning digital asset market is both innovative and secure. Whether this no-action letter is a harbinger of more permanent regulatory changes or a temporary solution remains to be seen, but it unquestionably marks a pivotal moment in the ongoing saga of cryptocurrency regulation in the United States.
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
