Crypto

SEC Could Clear State-Chartered Trusts for Crypto Custody, Potentially Benefiting Ripple Affiliates and DePIN Tokens

3 weeks ago
Bitcoin Ethereum News
Sheila Belson

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SEC crypto custody: The SEC issued a no-action letter allowing registered investment advisers to treat state-chartered trust companies as qualified custodians for crypto, provided trusts meet banking authorization, asset segregation, and contractual restrictions on lending or rehypothecation, while advisers retain fiduciary responsibility.

  • SEC permits state-chartered trusts as qualified crypto custodians under strict conditions.

  • Project Crypto and industry analysts say the move signals clearer regulation and measured integration of digital assets.

  • DePIN token distributions were distinguished from securities when tokens reward network participation rather than investment returns.

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SEC crypto custody cleared for state-chartered trusts; advisers must confirm banking authorization and segregation. Read compliance steps and implications — learn more.

SEC clears state trust companies for crypto custody and expands no-action guidance to token distribution models.

  • SEC allows advisers to treat state-chartered trusts as qualified crypto custodians under strict conditions.
  • Analysts view the move as a shift toward clearer rules, with Project Crypto signaling broader regulatory openness.
  • DePIN token models gain distinction from securities as rewards for network participation, not investment schemes.

What does the SEC no-action letter change about crypto custody?

The SEC’s no-action letter clarifies that registered investment advisers may treat state-chartered trust companies as qualified custodians for crypto assets when trusts have explicit banking authorization, maintain segregated holdings, and accept contractual limits on lending or using client funds. Advisers remain responsible for client protection and compliance.

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How must advisers verify a trust’s eligibility?

Advisers should confirm that a state-chartered trust holds authorization from relevant banking regulators to provide crypto custody services. Custodial agreements must explicitly prohibit lending or rehypothecation of client crypto without consent and ensure client assets are segregated from the trust’s own holdings.

Why does this matter for funds and advisers?

Front-loaded clarification reduces operational uncertainty for crypto fund managers and advisers who previously faced restrictive interpretations under prior SEC guidance. The decision can expand custody options for regulated funds and clients while keeping fiduciary duties and compliance verification squarely on advisers.

What did industry experts say?

Bloomberg ETF analyst James Seyffart described the letter as increased clarity for the digital asset sector. Observers link this approach to the SEC Chair’s Project Crypto initiative, aiming to lower unnecessary regulatory friction while integrating digital assets into financial markets.

How does the SEC’s stance affect token distribution models like DePIN?

The SEC issued a separate no-action letter addressing DePIN (decentralized physical infrastructure network) token models. The agency acknowledged that tokens distributed as programmatic rewards for services such as storage or bandwidth are distinct from capital-raising instruments and therefore may fall outside securities classifications evaluated under the Howey Test.

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What distinguishes DePIN tokens from securities?

DePIN tokens are typically allocated as compensation for network participation or service provision, not as investor-funded promises of profit. The SEC noted programmatic distribution and lack of fundraising intent as factors that separate such tokens from investment contracts subject to securities regulation.

What compliance steps should advisers take now?

Advisers must implement due diligence and contractual safeguards before relying on state-chartered trusts as custodians. Below are practical steps to follow:

  1. Verify trust banking authorization with relevant state or federal regulators.
  2. Include explicit contractual prohibitions on lending, rehypothecation, or commingling of client crypto.
  3. Ensure crypto assets are held segregated from trust-owned holdings and provide audit access or reporting standards.
  4. Document fiduciary determinations showing the trust arrangement is in clients’ best interests.
  5. Monitor ongoing regulatory guidance and maintain incident-response and asset-recovery plans.

Frequently Asked Questions

Can advisers treat state-chartered trust companies as banks for custody under the Investment Advisers Act?

Yes. Under the SEC Division of Investment Management’s no-action letter, advisers may treat state-chartered trusts as banks for custody purposes if trusts hold appropriate banking authorization, enforce segregation, and comply with contract restrictions. Advisers must document their fiduciary assessment.

Does the no-action letter change securities law?

No. The SEC emphasized the letter does not alter existing statutes or carry independent legal force; it reflects an enforcement discretion in specific circumstances but does not change statutory definitions or replace formal rulemaking.

Are DePIN token distributions now categorically non-securities?

The SEC indicated certain DePIN token models—where tokens compensate service participation rather than raise investor capital—can be treated differently from securities. Each model must be evaluated on facts and distribution mechanics to determine classification.

Key Takeaways

  • Regulatory shift: The SEC’s no-action letter opens custody options by recognizing state-chartered trusts when compliance standards are met.
  • Adviser responsibility: Advisers must verify authorization, enforce segregation, and document fiduciary decisions.
  • Token clarity: DePIN-style programmatic token distributions may be distinguished from securities based on distribution mechanics.

Conclusion

The SEC’s twin no-action letters mark a cautious move toward clearer rules for crypto custody and token distributions. Advisers should act now to verify trust authorizations, strengthen custodial agreements, and document compliance decisions. Expect continued regulatory refinement under Project Crypto and ongoing guidance from the SEC.

Published: 2025-10-01 | Updated: 2025-10-01 | Author: COINOTAG

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Source: https://en.coinotag.com/sec-could-clear-state-chartered-trusts-for-crypto-custody-potentially-benefiting-ripple-affiliates-and-depin-tokens/