Just before the October federal government shutdown, the SEC staff issued a no-action letter providing some clarity as to when a state-regulated banking or trust institution can serve as a “qualified custodian” under the Investment Advisers Act of 1940 or a permissible custodian under the Investment Company Act of 1940 with respect to digital assets that are subject to the custody provisions of those acts (crypto assets). The no-action letter provides needed clarity as to the use of these state-regulated entities (SREs) to custody crypto assets and, as a result, expands the universe of entities that can be used for that purpose.
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