The SEC’s recent no-action letter signals a willingness to allow state-chartered trust companies to serve as custodians for cryptocurrency assets, lowering regulatory barriers. The letter stated that the staff would not recommend enforcement action against registered investment advisers or regulated funds that maintain crypto assets and related cash equivalents with certain state-chartered financial institutions. “For too long, registered advisers and regulated funds have been caught up in a guessing game as to whether their entity of choice for crypto asset custody, which also may be the only available custodian for such service, is a permissible custodian under the custody provisions of the Investment Advisers Act of 1940,” SEC Commissioner Hester Pierce said. Though nonbinding, the guidance carries weight. It signals that the SEC is willing, at least for now, to accept a role for state trust companies — traditionally less systemically prominent than national banks — as eligible custodians for cryptocurrency assets. For an industry grappling with the mechanics of safeguarding billions of dollars’ worth of private keys and tokenized instruments, that small gesture may have outsized implications. After all, payment firm Stripe is reportedly applying for a New York State trust charter as it looks to scale its stablecoin offerings. The SEC’s no-action letter does not settle the custody debate, but it reframes it. By signaling tolerance for state-regulated custodians, the agency has effectively invited traditional finance to engage more directly with cryptocurrency infrastructure. By acknowledging the role of state-chartered trust companies, the SEC letter effectively opens the door to a more competitive, and perhaps fragmented, custody market.