XRP News Today: Ending the Guessing Game: SEC Clarifies Crypto Custody Rules for State Trusts

The U.S. Securities and Exchange Commission (SEC) has issued a no-action letter on September 30, 2025, clarifying that state-chartered trust companies can qualify as custodians for crypto assets in registered investment funds. This decision directly impacts firms like Ripple and Coinbase, which operate as state-chartered trust companies and had previously faced uncertainty over their eligibility under federal custody rules. The guidance resolves longstanding ambiguity about whether such entities meet the legal definition of a "bank" under the Investment Advisers Act of 1940 and the Investment Company Act of 1940, effectively enabling them to serve as qualified custodians for institutional clientsSEC Clarifies Custodian Rules, Enabling Ripple and …^[1].

The SEC's letter addresses concerns raised by the crypto industry, particularly the lack of clarity on the eligibility of state trust companies to hold digital assets. Brian Daly, Director of the SEC's Division of Investment Management, emphasized that the move was necessary because these entities were "not universally seen as eligible custodians for crypto assets." By confirming their eligibility, the SEC has created a regulatory pathway for firms like Ripple and Coinbase to offer custody services to registered funds, aligning with the growing recognition of state-chartered trust companies as legitimate participants in the crypto sectorRipple, Coinbase Qualify As Crypto Custodians After …^[2].

The guidance outlines specific requirements for investment advisers using state trust companies as custodians. Advisers must conduct annual reviews to ensure custodians have policies safeguarding crypto assets from theft or loss. Custodial agreements must prohibit the lending, pledging, or rehypothecating of client assets without explicit consent. Additionally, state trust companies must maintain audited financial statements under GAAP and independent reports on internal controls. These measures aim to ensure crypto assets are segregated from the custodian's balance sheet, a practice that has been linked to past industry collapses like FTX and Celsius NetworkSEC Clarifies Custodian Rules, Enabling Ripple and …^[1].

The SEC's decision has been praised by industry stakeholders and regulators as a step toward regulatory clarity. SEC Commissioner Hester Peirce, known for her pro-crypto advocacy, called the guidance an "encouraging development" that ends the "guessing game" for registered advisers and funds. Wyoming Senator Cynthia Lummis also expressed optimism, noting the Biden administration's previous criticism of similar state-level initiatives in 2020. Bloomberg ETF analyst James Seyffart described the move as a "textbook example of more clarity for the digital asset space," highlighting its alignment with industry demands for structured frameworksRipple, Coinbase Qualify As Crypto Custodians After …^[2].

While the no-action letter provides immediate relief, the SEC has not ruled out future rulemaking. Daly noted the guidance is designed to address "today's products, today's managers, and today's issues," leaving room for updates as the market evolves. For now, Ripple, Coinbase, and other firms operating under similar structures have gained a significant opportunity to expand their roles in the financial system as recognized custodians. This development is expected to accelerate the creation of digital asset funds and exchange-traded products by providing clearer custody pathways, particularly for institutional investors seeking regulatory certaintyRipple and Coinbase Eligible for SEC Crypto Custodian Role^[3].

The SEC's decision underscores a broader trend of regulatory adaptation in the crypto space. By tying eligibility to state banking regulations-such as licensing, minimum capital requirements, and regular examinations-the agency balances innovation with investor protection. This approach mirrors similar efforts in traditional finance, where custodianship standards have long been established. For the crypto industry, the move signals a potential turning point in legitimizing institutional-grade custody services, which could pave the way for broader adoption of digital assets in mainstream financial marketsSEC Guidance Lets Ripple, Coinbase, BitGo Act as …^[4].