Yesterday, the Securities and Exchange Commission’s Division of Investment Management issued a no-action letter regarding the provision of custody for cryptocurrencies.
A no-action letter is not a hard ruling but provides guidance for firms engaged in the business addressed in the statement. The letter was in response to a query by the law firm of Simpson, Thacher and Bartlett, which was sent the same day (September 30, 2025).
The Division states:
Based upon the facts and representations set forth in your letter, the Division of Investment Management would not recommend enforcement action to the Commission under the Custody Provisions against a Registered Adviser or Regulated Fund for treating a State Trust Company as a “bank” with respect to the placement and maintenance of Crypto Assets and Related Cash and/or Cash Equivalent.
There are several caveats, including the state trust company being authorized by the relevant state authority to provide custody for crypto.
Two Commissioners were quick to respond to the no-action letter.
Commissioner Caroline Crenshaw, the lone Democrat member of the Commission, said the ruling “jumps the gun” and pokes holes in their custody regime:
“Today’s no-action position lacks factual support in key areas and provides scant legal justification for poking holes in core statutory protections. In fact, the only justification for the relief seems to be a false narrative that no other entities are available to custody crypto assets consistent with our rules.”
And;
“With limited factual support or legal analysis, this action bores a troubling hole in that regime – and I fear investors’ assets may fall through the cracks.”
Commissioner Hester Peirce, who leads the Crypto Task Force at the SEC, took an opposing view. She said:
“The [no-action letter] does not expand the definition of a permissible custodian under the Advisers Act and 1940 Act. Rather, it provides a staff position regarding the use of entities for crypto asset custody that I would contend already are permissible custodians. The [no-action letter] applies to State Trust Companies operating within a regulatory framework that ensures investor protection and is similar in material respects to the regulatory frameworks applicable to other types of permissible custodians.”
She also advocated for the modernization of custody requirements for registered advisors and funds.
The SEC under the current administration has embraced digital asset innovation in contrast to the prior administration, which deemed all crypto as bad.
