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Investment advisers can use state-chartered trust companies as qualified custodians for cryptocurrencies like XRP, thanks to a no-action letter issued by the US Securities and Exchange Commission (SEC).

 

State-chartered trust companies are permitted to offer crypto custodial services following due diligence by investment advisors, as stated in the staff letter. Simpson Thacher and Bartlett LLP had previously requested guarantees from the SEC that it would not suggest enforcement action for treating state trust companies as banks.

The SEC responded with the no-action letter.

Financial advisors are obligated by the Investment Advisers Act of 1940 to hold client assets in the custody of a qualified custodian, usually a bank or trust company. However, industry participants are eager to get clarification from the SEC, as state-chartered trust companies are typically not regarded as qualified custodians for cryptocurrency assets.
According to analysts, the no-action letter is expected to have a significant impact on the cryptocurrency market, potentially allowing new firms to enter the custody market.

Coinbase Custody and Ripple, through its subsidiary Standard Custody and Trust, will be acknowledged as qualified custodians in accordance with the most recent SEC position.

Coinbase is already determining its course in this regard after being selected by the US Marshals Service of the DOJ to hold cryptocurrency assets. Ripple’s attempt to introduce cryptocurrency custody services for banks has accelerated significantly as the local ecosystem heats up.