SEC Issues No-Action Letter on State Trust Companies Serving as Custodians for Crypto Assets

On September 30, the SEC issued a no-action letter to Simpson Thacher & Bartlett confirming that, under certain conditions, registered investment advisers and registered investment companies, including BDCs, may use state trust companies (STCs) as custodians for crypto assets and related cash equivalents. The no-action letter allows qualifying STCs to act as ‘banks’ under the custody rules of the 1940 Act and the Investment Advisers Act, and outlines a number of conditions that eligible STCs must meet, including, but not limited to, a best interest determination, appropriate authorization, implementation of certain policies and procedures, adoption of certain custodial services agreement provisions,  and disclosure requirements. The letter signals that the SEC remains focused on establishing a regulatory framework to accommodate crypto assets, and is cognizant of the many moving parts that must be addressed in order to do so.

Click here to view the SEC’s No-Action Letter.
Click here to view the Simpson Thacher letter requesting relief.