Core Viewpoint - The U.S. Securities and Exchange Commission (SEC) will not pursue enforcement actions against investment advisers and registered funds using state-chartered trust companies for crypto asset custody, providing temporary clarity in a previously uncertain regulatory environment [1][6]. Group 1: Regulatory Clarity - The SEC's letter indicates that state-chartered trusts may be treated as "banks" under the Investment Advisers Act of 1940 and the Investment Company Act of 1940 for safeguarding digital assets [2]. - Investment advisers and regulated funds can now place client crypto holdings and related cash with state-chartered trusts without violating federal custody rules [3][4]. - The SEC's guidance is significant as federal law requires advisers to use a "qualified custodian," typically a national bank or trust company, to hold client assets [4]. Group 2: Conditions and Compliance - Advisers must conduct due diligence to ensure that the state-chartered trust is authorized by its state banking authority for crypto custody, maintains audited financial statements, and has internal controls verified by independent accountants [5]. - Trusts must follow strict policies to protect private keys, segregate client assets, and prohibit rehypothecation without client consent [5]. Group 3: Market Implications - The SEC's no-action position could broaden the crypto custody market, allowing greater participation from firms such as Coinbase, Ripple's Standard Custody, BitGo, and WisdomTree [6][7]. - The additional clarity from the SEC was deemed necessary to address uncertainties regarding the eligibility of state-chartered trusts [7].