U.S. Securities & Exchange Commission (SEC) Commissioner Caroline A. Crenshaw published a statement responding to SEC staff no-action relief that permits state-chartered trust companies to act as custodians for crypto assets under the Investment Company Act and the Investment Advisers Act. She argues the relief weakens the federal custody framework by expanding custody to state entities that are not federally chartered banks and may not meet existing safeguards designed to protect client and fund assets from loss, theft, or misappropriation. The statement contrasts state trust companies with the limited set of entities contemplated by the statutory custody regimes, including “qualified custodians” under the Investment Advisers Act such as banks, registered broker-dealers, and registered futures commission merchants, and the enumerated custodians used by registered funds under the Investment Company Act. Crenshaw highlights features of the federal banking framework, including Office of the Comptroller of the Currency chartering and oversight processes, internal control expectations, and established receivership mechanisms, and argues state trust oversight varies materially across jurisdictions, including crypto-specific state regimes. She also criticises the no-action position for limited factual and legal support, for carving out a crypto-only approach while excluding non-crypto assets, and for potentially disadvantaging firms pursuing national bank charters for crypto custody by allowing state trust companies to bypass that pathway. Crenshaw contends that a change of this magnitude should be addressed through Commission rulemaking with public comment and economic analysis, and points to the Commission’s Spring 2025 Regulatory Flex Agenda as indicating forthcoming rulemaking on crypto asset custody.
U.S. Securities & Exchange Commission 2025-09-30
U.S. Securities & Exchange Commission Commissioner Crenshaw criticises no-action relief allowing state trust companies to act as crypto asset custodians
SEC Commissioner Caroline A. Crenshaw criticized the SEC staff's no-action relief allowing state-chartered trust companies to act as custodians for crypto assets, arguing it undermines the federal custody framework by including entities not federally chartered. She highlighted the disparity between state trust oversight and federal banking standards, emphasizing the need for Commission rulemaking with public input. Crenshaw noted the potential disadvantage to firms seeking national bank charters for crypto custody.