SEC Eyes Firms To Take Crypto Custody

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When it comes to changing the rules for institutional crypto investing, Wyoming keeps pushing the envelope.

A public statement from the Securities and Exchange Commission today reveals that the federal agency is looking into which institutions can qualify as “qualified custodians” for client funds.

The statement, from the SEC’s Division of Investment Management, follows a no-action letter from the Wyoming Division of Banking to a state-chartered public trust company, Two Ocean Trust. In it, the division judges Two Ocean to be a “qualified custodian” and therefore eligible to “provide custodial services for digital assets under Wyoming law, including virtual currency and digital (tokenized) securities.”

This may seem like inside baseball (and it is). However, depending on where the SEC ultimately comes down, it could let traditional registered investment advisors, who may have been reticent to get involved with crypto custody, know what the score is. 

Unlike Kraken Financial and Avanti, which recently won bank charters from Wyoming to offer digital asset banking services, Two Ocean Trust is a wealth management firm. 

Though the Wyoming letter is careful to say that not all non-depository trust companies are banks or qualified custodians, it does say Two Oceans essentially falls under the definition of bank according to the Investment Advisers Act of 1940, which requires firms that give financial advice about securities to register with the SEC, as well as the SEC Custody Rule, which sets out requirements for protecting client assets.