State trust companies enter the custody business under SEC proposal
The SEC proposed rules letting state-chartered trust companies custody crypto assets for investment advisers and regulated funds, under conditions including audited financials and segregated client holdings.
The Securities and Exchange Commission proposed rules on Oct. 1 that would let state-chartered trust companies serve as crypto custodians for registered investment advisers and regulated funds, a category the current custody framework has left out.
The proposal, announced in the SEC’s press release, would amend rules under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 to give advisers and funds a compliant path to holding crypto assets. Chairman Paul S. Atkins said the rules would replace “the grey of uncertainty created by custody rules crafted for a bygone era.”
State trust companies would enter only under conditions. The proposal requires that the company be authorized by its state authority to provide crypto custody, maintain reasonable procedures to safeguard assets from loss, theft or misappropriation, produce audited financial statements and internal control reports, and keep client holdings segregated from its own assets. The SEC also proposes letting records kept on a blockchain count toward compliance, subject to conditions.
For the custody market, the change widens the field beyond banks and broker-dealers. It has long been unclear which crypto arrangements satisfy the qualified custodian standard, and that ambiguity left many firms hesitant to offer digital-asset strategies at all. In a May 2025 submission to the SEC, the Digital Chamber said some advisers had declined token allocations or asked portfolio companies to retain them until custody became available.
The SEC framed the proposal as removing regulatory barriers that inhibit advisers’ ability to provide crypto-related investment advice and expanding investor choice. The proposal would also permit advisers to self-custody client crypto when no permitted custodian is available, a narrow exception the agency expects to be unusual.
The rules are not final. A 60-day public comment period opens once the proposing release is published in the Federal Register; that date is not yet set.
