SEC Implements Innovative No-Action Relief for State-Chartered Trusts Inspired by Wyoming’s McDermott Model

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SEC Implements Innovative No-Action Relief for State-Chartered Trusts Inspired by Wyoming’s McDermott Model

Wyoming Trust Companies Approved as Custodians by SEC: A Major Step for Digital Assets

SEC Officially Endorses State-Chartered Trust Companies

The Securities and Exchange Commission (SEC) has validated a significant shift in asset custody by endorsing state-chartered trust companies as qualified custodians under the Investment Company Act of 1940 (the 1940 Act) and the Investment Advisers Act of 1940 (the Advisers Act). This marks a pivotal moment for digital assets following an initial move in July 2020 when Wyoming’s Two Ocean Trust received “no-action” relief, spearheading a major movement in digital asset custodianship.

Wyoming’s Groundbreaking Role in Digital Asset Custody

Wyoming’s pioneering efforts, especially through their robust Digital Asset Custody framework established in 2020, have played a crucial role in this development. The state’s initiative provided a framework and enhanced bankruptcy protections for client assets held at trust companies, solidifying its position as a leader in this field. These efforts have made state-chartered trust companies central players for digital asset firms, succeeding where traditional custodians have hesitated.

Key Criteria for State-Chartered Trust Companies

The SEC’s recent No-Action Letter, dated September 30, 2025, outlines specific criteria these trust companies must meet to serve as qualified custodians for investment advisers and companies. These include:

Authorization by relevant State Banking Authorities to provide custody services.
Implementation of robust internal policies to safeguard Crypto Assets and related financial instruments.
Audited financial statements to ensure transparency and accountability.
Provision of recent internal control reports confirming the adequacy of custodial services.
Entering into agreements ensuring custodial funds are segregated and not subject to lending or pledging activities.

Implications for the Digital Asset Industry

This endorsement clarifies the previously ambiguous stance of the SEC, which, while acknowledging Wyoming’s determination, initially refrained from fully endorsing state-chartered trust companies. The recent developments dismiss uncertainties surrounding enforcement actions and substantiate the legitimacy of these trust companies as custodians for regulated entities.

Emegypt Recognizes Influential Developments

Emegypt highlights McDermott Will & Schulte’s instrumental assistance in this pioneering move, contributing to a transformative recognition by the SEC. This progress not only strengthens trust in state-chartered entities but also aligns with the stringent standards set by Wyoming’s Digital Asset Custody framework.

The SEC’s acceptance is set to enhance confidence in state trust companies’ custodial services, marking a significant milestone for investment firms seeking trustworthy custodial services for digital assets.