SEC Opens Door for Investment Advisers to Use State Trusts as Crypto Custodians

In a notable shift, the SEC has indicated that state-chartered trust companies may now qualify as “qualified custodians” under the Investment Advisers Act, allowing registered investment advisers (RIAs) to use these entities to custody crypto assets on behalf of clients. Previously, custody options were largely limited to federally regulated banks or broker-dealers, which constrained how advisers could manage client crypto holdings.

This reinterpretation comes amid the SEC’s new Safeguarding Rule proposal, which expands custody obligations to cover all client assets—including digital assets—and asks public comment on whether trust companies can meet the standards expected of custodians. If adopted, the rule would require strict safeguards: segregated accounts, independent audits, robust operational controls, and proof of possession or control over client assets.

For the crypto ecosystem, this change could widen the pool of custody providers, giving advisers more flexibility and potentially lowering barriers to institutional adoption. State chartered trust firms that have already built infrastructure for crypto custody stand to benefit, while advisors evaluating custody options will need to scrutinize whether trust companies can match the protections provided by legacy financial institutions.