RESEARCH: United States Custody Requirements for Digital Assets

Executive Summary

Crypto custody in the United States is legal but governed by a fragmented framework of securities laws, banking regulations, and state-level trust company rules. The SEC is the primary federal regulator for custody of digital assets deemed to be securities, operating under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. There is no single federal "crypto custody license" — instead, firms must navigate existing regimes for broker-dealers, investment advisers, and banks, with state-chartered trust companies playing a significant role.

A qualified custodian can operate in the United States today through several viable charter pathways: a New York state trust company charter (NYDFS-supervised, approximately $1M+ minimum capital), a South Dakota state trust company charter ($500k minimum capital), an OCC special-purpose national bank charter (typically $20M+ initial capital), an SEC-registered broker-dealer with custody capabilities (FINRA and SIPC member), or a state money transmitter license for non-securities custodial activity. Currently operating custodians include Coinbase Custody Trust Company, Fidelity Digital Assets, Anchorage Digital Bank, BitGo Trust Company, and Bakkt Trust Company. The compliance burden varies dramatically by charter type, and firms should engage early with the SEC's FinHub and the relevant state regulator.

Definitions

Qualified Custodian (Advisers Act Rule 206(4)-2(d)(6)): A U.S. bank with FDIC-insured deposits; a U.S. registered broker-dealer that is a SIPC member; a U.S. registered futures commission merchant; a foreign financial institution meeting specified conditions (for foreign assets); or a state-chartered trust company with capital and surplus of at least $200,000 (historical interpretation; digital assets applicability unsettled). SEC.gov | Staff Responses to Questions About the Custody Rule

Eligible Foreign Custodian (Investment Company Act Rule 17f-5(c)(1)): A foreign bank, foreign securities depository, foreign clearing agency, or a foreign branch of a U.S. bank, meeting specified criteria including capital adequacy and regulatory oversight. Used only for custody of investment company assets abroad. SEC.gov | Custody of Investment Company Assets Outside the United States

Qualified Custodian (Proposed Rule IA-6240, February 2023): The proposed Safeguarding Advisory Client Assets rule would have revised the definition to include certain state-chartered trust companies explicitly and would have expanded coverage to all client assets, but the proposal was not adopted. Proposed rule: Safeguarding Advisory Client Assets

State Trust Companies: State-chartered entities authorized under state banking law to act as fiduciaries (including custodians). Whether a state trust company qualifies as a "qualified custodian" under Rule 206(4)-2 remains unsettled for digital assets, though the SEC's 2021 no-action position supported it under specific conditions. (See Regulatory Framework — Federal Banking Charters below.)

Regulatory Framework

Statutory and Regulatory Basis

• The Securities and Exchange Commission (SEC) is the primary federal regulator for custody of crypto assets that are deemed securities, operating under the Investment Advisers Act of 1940 (15 U.S.C. 80b) and the Investment Company Act of 1940 (15 U.S.C. 80a). SEC.gov | Custody of Funds or Securities of Clients by Investment Advisers

• Rule 206(4)-2 under the Investment Advisers Act of 1940 is the core custody rule for investment advisers, requiring client funds and securities to be maintained with qualified custodians; the rule was amended most recently in 2009 (Release No. IA-2968, codified at 17 CFR 275.206(4)-2). SEC.gov | Staff Responses to Questions About the Custody Rule | Final Rule: Custody of Funds or Securities of Clients by Investment Advisers; Release No. IA-2176

• The SEC adopted amendments to the custody rule in 2003 (Release No. IA-2176, File No. S7-28-02, effective November 5, 2003, compliance date April 1, 2004), which modernized the rule and required advisers to maintain client assets with broker-dealers, banks, or other qualified custodians. SEC.gov | Custody of Funds or Securities of Clients by Investment Advisers

• Rule 17f-5 under the Investment Company Act of 1940 governs custody of investment company assets outside the United States (17 CFR 270.17f-5). The rule requires registered investment companies to place foreign assets with eligible foreign custodians, with board oversight responsibilities. The 1997 amendments (62 FR 26923, May 16, 1997; Release No. IC-22573) and subsequent 1998 revisions established the current framework. SEC.gov | Custody of Investment Company Assets Outside the United States

• Rule 17f-4 under the Investment Company Act of 1940 (17 CFR 270.17f-4) governs custody of fund assets by member banks of the Federal Reserve System, while Rule 17f-6 (17 CFR 270.17f-6) addresses custody of fund assets with futures commission merchants. These rules work in conjunction with Rule 17f-5 for the U.S. and foreign custody framework. SEC.gov | Custody of Funds or Securities of Clients by Investment Advisers

• SEC Release IA-6240 (February 15, 2023): The SEC proposed the "Safeguarding Advisory Client Assets" rule, which would have expanded the custody rule to cover all client assets (not just funds and securities), explicitly covering crypto assets. The proposal included provisions for discretionary authority over client assets, surprise examinations for all custodians, and revised qualified custodian definitions. The proposal was not adopted and was subsequently abandoned. Proposed rule: Safeguarding Advisory Client Assets | FACT SHEET Proposed Safeguarding Rule

• Staff Accounting Bulletin (SAB) 121 (March 2022): Required entities safeguarding crypto assets to record liabilities and corresponding assets on their balance sheets at fair value, making custody operationally and capital-intensive. SAB 122 (January 2024) rescinded SAB 121 and restored traditional accounting treatment for crypto asset custody obligations, removing a significant capital barrier. SEC.gov | Staff Accounting Bulletin No. 121 | SAB No. 122

Federal Banking Charters (OCC)

• The Office of the Comptroller of the Currency (OCC) has confirmed that national banks and federal savings associations possess authority to provide crypto custody services:

• OCC-chartered trust banks must maintain specific capital and risk management requirements as outlined in the OCC Licensing Manual. The OCC's 2021-2022 supervisory guidance emphasized that banks engaging in crypto activities must maintain appropriate risk management, capital, and liquidity standards.

• Anchorage Digital Bank (formerly Anchorage Trust Company) received the first conditional OCC national trust charter approval in January 2021, establishing a precedent for digital asset custodians to operate as special-purpose national banks.

State Trust Company Charters (NY, SD, NV, WY)

State-chartered trust companies are the most common vehicle for crypto custody. Key state charters include:

*EUR conversions calculated at the December 2024 average rate of USD 1.0824 per EUR (Federal Reserve H.10 statistical release). Figures are approximate and for reference only; firms should verify current exchange rates at the time of planning.

Note: Capital minimums vary by state and charter type; figures represent regulatory minimums as of 2024-2025 filings. Regulatory practice typically requires higher capital commensurate with the scale and risk of the custody operation.

Broker-Dealer Custody (SEC/FINRA)

• SEC-registered broker-dealers may custody digital asset securities under the Special Purpose Broker-Dealer (SPBD) framework (December 2020 staff no-action relief) or under the general Customer Protection Rule where applicable.
• The SPBD framework has been described by SEC Commissioner Hester Peirce as "virtually unusable due to unrealistic constraints placed on participants," including the requirement that SPBDs cannot custody non-security crypto assets alongside crypto asset securities without a clear pathway to also operate as a state trust company. SEC.gov | Out of the Gray Zone
• Broker-dealers that custody customer assets must comply with the Customer Protection Rule (Rule 15c3-3) , requiring segregation of customer securities and funds, and the Net Capital Rule (Rule 15c3-1) . SEC.gov | Form Custody for Broker-Dealers

Money Transmitter Licenses (State/FinCEN)

• Crypto custodians that provide money transmission services must register with FinCEN as Money Services Businesses (MSBs), unless they are explicitly regulated as state-chartered trust companies and are exempt under FinCEN's 2019 guidance. FATF Mutual Evaluation Report United States (2024)
• State money transmitter licenses are required on a state-by-state basis, with surety bonds ranging from $10,000 to $500,000 per state.
• FinCEN's 2019 guidance confirms that convertible virtual currency (CVC) custodians are subject to the Travel Rule (31 CFR 1010.410(f)), requiring customer information transfer between financial institutions for transactions above $3,000.

AML/CFT Requirements (BSA, FinCEN)

• The Bank Secrecy Act (BSA) requires financial institutions, including MSBs and custodians, to implement written customer identification programs (CIPs), beneficial ownership identification, and ongoing monitoring under FinCEN's CDD Final Rule (May 2018).
• Suspicious Activity Reports (SARs): Firms must file SARs for transactions of $2,000 or more in suspicious circumstances (31 CFR 1022.320).
• Record Retention: BSA requires maintenance of records for 5 years for certain transactions, including currency transaction reports (CTRs) and funds transfer records.
• BSA/FinCEN obligations sit outside SEC custody regulations. A state-chartered trust company must comply with both the SEC's custody framework (if acting as a qualified custodian for advisers) and its own BSA/AML obligations under 31 CFR Chapter X.

Enforcement Actions

• Prime Trust (June 2023): The Nevada Financial Institutions Division ordered Prime Trust, a state-chartered trust company providing crypto custody, to cease operations and revoked its trust license due to financial failure and inability to return customer assets. Prime Trust later filed for Chapter 11 bankruptcy; customers reported losses related to custody failures. This case demonstrates that state trust charters provide no guarantee of custodial integrity.
• Coinbase, Inc. (Wells Notice, March 2023; SEC v. Coinbase, June 2023): The SEC issued a Wells Notice to Coinbase, indicating its intent to recommend an enforcement action related to alleged unregistered securities — including its staking-as-a-service product. In June 2023, the SEC filed suit against Coinbase, alleging it operated as an unregistered exchange, broker, and clearing agency. The case is pending in the Southern District of New York.
• Kraken (February 2023): The SEC charged Kraken with operating an unregistered securities exchange, broker, and clearing agency through its staking-as-a-service program. Kraken agreed to pay $30 million in disgorgement, penalties, and interest, and to cease offering its staking services to U.S. customers.
• Binance.US (June 2023): The SEC filed a 13-count complaint against Binance.US and its parent entity Binance Ltd., alleging, among other things, the commingling of customer funds and the failure to maintain custody controls. The case is pending in the U.S. District Court for the District of Columbia.
• SEC v. Ripple Labs, Inc. (July 2023): The Southern District of New York held that XRP programmatic sales on digital asset exchanges do not constitute offers and sales of securities, but institutional sales did. The decision has important implications for which digital assets must be treated as securities for custody purposes. The case is on appeal as of 2025.
• New York DFS (2021): NYDFS fined Coinbase $50 million for violations related to its compliance program, including inadequate customer due diligence and transaction monitoring for its crypto operations.
• OCC Consent Orders (2022-2023): The OCC issued consent orders against several banks related to deficiencies in crypto-related risk management, including the need for enhanced customer due diligence and transaction monitoring for digital asset activities.

Regulatory Bodies

Licensing Requirements

Qualified Custodian Definition and Pathways

Under Rule 206(4)-2(d)(6), a "qualified custodian" for investment adviser custody purposes includes those entities listed in the Definitions section above. SEC.gov | Staff Responses to Questions About the Custody Rule | Conformed to Federal Register version, IA-5248

Licensing Pathways by Entity Type

1. SEC-Registered Broker-Dealer

• Must register with the SEC under Section 15(b) of the Securities Exchange Act of 1934 and become a member of FINRA.
• Must maintain membership in SIPC.
• Must comply with the Customer Protection Rule (Rule 15c3-3) , which requires segregation of customer securities and funds.
• Must maintain compliance with Net Capital Rule (Rule 15c3-1) — see Capital Requirements below.
• May custody digital asset securities under the Special Purpose Broker-Dealer (SPBD) framework (December 2020 staff no-action relief), or under the general Customer Protection Rule where applicable.

2. OCC-Chartered National Bank or Trust Bank

• The OCC permits national banks to provide crypto custody services through Interpretive Letters 1170 (July 2020), 1172 (September 2020), and 1174 (October 2020), which confirm that providing cryptocurrency custody services is a permissible activity for national banks under 12 U.S.C. § 24(Seventh).
• Interpretive Letter 1179 (November 2020) confirmed national bank authority to hold stablecoin reserves.
• Anchorage Digital Bank (formerly Anchorage Trust Company) received the first conditional OCC national trust charter approval in January 2021, establishing a precedent for digital asset custodians to operate as special-purpose national banks.
• OCC-chartered trust banks must maintain specific capital and risk management requirements as outlined in the OCC Licensing Manual.

3. State-Chartered Trust Company

State-chartered trust companies are the most common vehicle for crypto custody. Key state charters are detailed in the Regulatory Framework — State Trust Company Charters section above. The application process typically involves:

• Submission of a charter application to the state banking regulator, including business plan, financial projections, and governance documentation.
• Capital deposit requirement per state law (see table above).
• Background checks and fitness determinations for officers and directors.
• Ongoing supervisory examinations and reporting obligations.

4. SEC Special Purpose Broker-Dealer (SPBD) Framework

The SPBD framework was created through SEC staff no-action relief in December 2020 (as applied to firms such as Fidelity Digital Assets). However, SEC Commissioner Hester Peirce has publicly noted that the framework "proved virtually unusable due to unrealistic constraints placed on participants." These constraints include the requirement that SPBDs cannot custody non-security crypto assets alongside crypto asset securities, without a clear pathway for broker-dealers to also operate as a state trust company.

Current status: The SPBD pathway remains formally available but disused. SEC staff has clarified that broker-dealers can comply with the Customer Protection Rule through alternative frameworks, including the use of state trust companies for crypto asset custody. SEC.gov | Staff Responses to Questions About the Custody Rule | SEC.gov | Out of the Gray Zone

5. State Money Transmitter License

For non-securities custodial activity, firms may obtain state money transmitter licenses. Requirements vary by state but generally include:

• Registration with FinCEN as an MSB.
• Surety bonds ranging from $10,000 to $500,000 per state.
• Net worth requirements and background checks for principals.
• State-by-state licensing, which can be coordinated through the Conference of State Bank Supervisors (CSBS) Money Transmission Modernization Act framework.

Ongoing Obligations for Licensed Custodians

• Internal control reports: For investment advisers that are also qualified custodians (or have related persons that are), the adviser must obtain a written internal control report regarding custodial practices. Current standard: SOC 1 Type II report (SSAE 18) , which replaced the earlier SAS 70 standard. The SOC 1 Type II report must cover specified relevant controls, be prepared by a registered public accounting firm, and be provided to the SEC upon request. The current operative requirement derives from the 2009 custody rule amendments (Release No. IA-2968). SEC.gov | Staff Responses to Questions About the Custody Rule

• Surprise examinations: Under Rule 206(4)-2, an adviser that has custody must have an independent public accountant conduct an annual surprise examination of client funds and securities, unless the qualified custodian sends account statements directly to clients. SEC.gov | Custody of Funds or Securities of Clients by Investment Advisers

• Form Custody: SEC-registered broker-dealers may be required to make Form Custody filings, which serve as a notification of custody arrangements for customer assets. SEC.gov | Form Custody for Broker-Dealers

• Technology providers: Technology providers play a large role in custodying crypto assets but typically offer services to regulated custodians rather than submitting to direct regulation themselves. This creates an additional layer of operational risk that custodians must assess and monitor.

Capital Requirements

Broker-Dealer Net Capital (Rule 15c3-1)

• SEC Rule 15c3-1 requires broker-dealers to maintain minimum net capital of:
  • $250,000 (approximately €231,000) for firms that carry customer accounts; or
  • $100,000 (approximately €92,000) for firms that do not carry customer accounts but receive customer funds.
• Broker-dealers that are also qualified custodians must maintain net capital sufficient to satisfy the Customer Protection Rule (Rule 15c3-3), including the reserve formula requirements.
• For firms seeking to custody digital asset securities, net capital requirements may be higher due to market risk haircuts applied to crypto asset positions held on the balance sheet.

Bank Leverage Ratios

• OCC-chartered national banks and trust banks must maintain minimum leverage ratios as follows:
  • Tier 1 leverage ratio: Minimum 4% (well-capitalized) or 3% (adequately capitalized) under 12 CFR Part 3.
  • Tier 1 risk-based capital ratio: Minimum 6% for well-capitalized status.
  • Total risk-based capital ratio: The sum of Tier 1 and Tier 2 capital must be at least 10% for well-capitalized status.
• OCC Interpretation of Capital Requirements for Digital Assets: Entities that hold digital assets as custodian generally are not required to hold capital against those assets, but must maintain operational risk capital buffers.

State Trust Company Capital Minimums

State-chartered trust companies that serve as crypto custodians must maintain capital as set by their chartering state. The table below includes EUR equivalents for international readers (conversion rate as noted above):

*EUR conversions calculated at the December 2024 average rate of USD 1.0824 per EUR (Federal Reserve H.10 statistical release). Figures are approximate and for reference only; firms should verify current exchange rates at the time of planning.

Surety Bonds and Insurance

• Surety bonds: State money transmitter licenses generally require surety bonds ranging from $10,000 to $500,000 per state, with aggregate requirements varying by volume. For trust companies, bonding requirements are typically set by the state's banking regulator and may be satisfied by capital and surplus.
• Insurance: No federal minimum insurance requirement exists for crypto custodians; however, state regulators may impose bonding requirements, and market practice includes:
  • Cyber liability insurance: Generally $1M–$10M in coverage, depending on custody AUM.
  • Crime/fidelity insurance: Typically $500k–$5M.
  • Professional liability (E&O) insurance: Generally $1M–$5M.

Note: These are minimum statutory figures. Regulatory practice typically requires higher capital commensurate with the scale and risk of the custody operation.

Risk Assessment

U.S. FATF Membership and Mutual Evaluation Status

The United States is a founding member of the Financial Action Task Force (FATF), the international standard-setting body for anti-money laundering and counter-terrorist financing (AML/CFT). The U.S. underwent its most recent FATF mutual evaluation in 2016, with the assessment report published in December 2016. The 2016 evaluation assessed the U.S. as having a robust legal framework with strong ratings on most Recommendations, though it identified areas for improvement in beneficial ownership transparency and supervision of certain non-bank financial institutions.

The U.S. submitted its fourth round follow-up reports in 2019 and subsequent years, addressing the recommendations from the 2016 evaluation. Notably, the U.S. received a "Partially Compliant" rating on Recommendation 15 (New Technologies/VASPs) in the 2024 mutual evaluation report, reflecting limitations in the supervision and monitoring of virtual asset activities. The 2024 report noted that while the U.S. has comprehensive AML/CFT laws, the fragmented regulatory structure for digital assets creates gaps — including inconsistent application of FinCEN's Travel Rule and divergent supervision across states. FATF Mutual Evaluation Report United States (2024)

Regulatory Risk Factors for Market Entry

• Fragmented regulatory oversight: Multiple federal and state regulators oversee different aspects of crypto custody, creating compliance complexity and potential gaps. The SEC's Crypto Task Force (announced February 4, 2025, led by Commissioner Hester Peirce) is working to develop a comprehensive framework.
• State trust company uncertainty: The SEC's no-action position regarding Wyoming-chartered trust companies (June 30, 2021) remains in effect but is limited to the specific facts of that letter. SEC.gov | WITHDRAWN: Staff Statement on WY Division of Banking
• Concentration risk: "Relatively few custodians serve the crypto asset markets," creating concentration risk and a dearth of technically capable custodians for some types of crypto assets. SEC.gov | Cultivating Confidence

Tax Treatment

Federal Income Tax Framework

The Internal Revenue Service (IRS) has issued significant guidance on the tax treatment of virtual currency, which directly impacts custody operations, internal accounting, and client reporting.

IRS Notice 2014-21 (April 2014): The IRS established the foundational principle that virtual currency is treated as property for federal income tax purposes, not as currency. This means:

• Capital gains and capital losses apply to the exchange of virtual currency for goods, services, or other property.
• Cryptocurrency received as payment for services is included in gross income at its fair market value on the date of receipt.
• Cryptocurrency held as "property" is subject to general tax principles applicable to property transactions.

Revenue Ruling 2019-24 (October 2019): The IRS clarified that:

• A hard fork (a blockchain protocol split) that creates a new cryptocurrency (e.g., Bitcoin Cash after August 1, 2017) results in income to the wallet holder if the new unit is received, valued at fair market value.
• An airdrop (a distribution of new units following a hard fork) is similarly treated as gross income.
• The IRS provided examples of how to determine income recognition dates and fair market value for these events.

Information Reporting and Backup Withholding

• Form 1099-B: Brokers, including certain crypto custodians and exchanges, must report proceeds from the sale or exchange of virtual currency on Form 1099-B. IRS Instructions for Form 1099-B

• Form 1099-DA (Digital Asset Proceeds): Under the Infrastructure Investment and Jobs Act (2021) , the IRS and Treasury were directed to implement reporting requirements for digital asset brokers. The IRS released Draft Form 1099-DA in April 2023; final regulations implementing these reporting obligations were published in TD 10000 (December 2024), effective for returns filed for calendar years beginning January 1, 2025. Broker reporting includes:

  • Gross proceeds from sales of digital assets.
  • Adjusted cost basis information for covered securities.
  • Transfer and redemption events.

• Backup Withholding: Under IRC § 3406, a custodian or broker must impose 24% backup withholding on reportable payments if the customer fails to furnish a correct TIN (or has been notified of a prior underreporting). IRS Publication 1281

• Custodian-specific obligations: Custodians that fail to file required information returns or furnish payee statements may be subject to penalties under IRC §§ 6721-6722. Custodians must also implement procedures for TIN collection and backup withholding compliance.

State-Level Tax Variations

• Income Tax: Many states follow federal property treatment, but state-specific conformity with IRS guidance varies:

  • Wyoming: No state income tax; virtual currency is treated as intangible property.
  • Texas: No state income tax; virtual currency treated as intangible property (HB 4474).
  • Washington: Virtual currency treated as intangible property for business and occupation (B&O) tax purposes; crypto custodians may be subject to service-based B&O tax.
  • New York: Follows federal treatment for income tax; sales tax treatment for virtual currency is unsettled; the state has not issued comprehensive guidance.

• Sales Tax: Most states do not impose sales tax on the exchange of digital assets themselves, but may impose sales tax on custody services or transaction fees.

• Property Tax: Generally not applicable to intangible digital assets, but a few states (e.g., Ohio) have explored taxation of digital assets as tangible property.

Practical Implications for Custody Operations

• Bookkeeping: Custodians must maintain records that track basis, holding period, and fair market value for each customer's digital assets.
• Reporting: Custodians that qualify as "brokers" under IRC § 6045 must file Forms 1099-DA and provide customer statements.
• Backup withholding: Custodians must implement procedures for TIN collection and backup withholding compliance.
• Custody-related income: Custodians that earn staking rewards or interest on customer assets must address income tax issues for the customer and may trigger withholding obligations.

AML/CFT Obligations

Bank Secrecy Act (BSA) and FinCEN Requirements

• MSB Registration: Crypto custodians that provide money transmission services must register with FinCEN as Money Services Businesses (MSBs), unless they are explicitly regulated as state-chartered trust companies and are exempt under FinCEN's 2019 guidance. FATF Mutual Evaluation Report United States (2024)

• Travel Rule: FinCEN's 2019 guidance confirms that convertible virtual currency (CVC) custodians are subject to the Travel Rule (31 CFR 1010.410(f)), requiring customer information transfer between financial institutions for transactions above $3,000.

• Customer Due Diligence (CDD): FinCEN's CDD Final Rule (May 2018) requires all financial institutions, including MSBs and custodians, to implement written customer identification programs (CIPs), beneficial ownership identification, and ongoing monitoring.

• Suspicious Activity Reports (SARs): Firms must file SARs for transactions of $2,000 or more in suspicious circumstances, including those associated with potential money laundering or terrorist financing (FinCEN SAR thresholds and requirements under 31 CFR 1022.320).

• Record Retention: BSA requires maintenance of records for 5 years for certain transactions, including currency transaction reports (CTRs) and funds transfer records.

• PEP Screening and Enhanced Due Diligence: Though not explicitly codified in BSA regulations, FinCEN expects financial institutions to implement risk-based policies for Politically Exposed Persons (PEPs).

FATF Mutual Evaluation

• The FATF Mutual Evaluation Report for the United States (2024) assessed the U.S. framework for anti-money laundering and counter-terrorist financing. The report rated the U.S. as having a robust legal framework but noted limitations in the supervision of Virtual Asset Service Providers (VASPs), particularly regarding state-by-state variation in AML supervision for money transmitters and the limited federal oversight of state-chartered trust companies providing crypto custody.

• The 2024 Mutual Evaluation noted that while the U.S. has comprehensive AML/CFT laws, the fragmented regulatory structure for digital assets creates gaps — including inconsistent application of FinCEN's Travel Rule and divergent supervision across states. The U.S. received a "Partially Compliant" rating on Recommendation 15 (New Technologies/VASPs) in the 2024 report, reflecting limitations in the supervision and monitoring of virtual asset activities.

Relationship to Custody Regulation

• BSA/FinCEN obligations sit outside SEC custody regulations. A state-chartered trust company must comply with both the SEC's custody framework (if acting as a qualified custodian for advisers) and its own BSA/AML obligations under 31 CFR Chapter X. The 2019 FinCEN guidance clarified that entities providing "acceptance and transmission" of virtual currency must register as MSBs, but state-chartered trust companies acting solely as custodians (not transmitters) may be exempt.

Note: For the U.S. FATF Mutual Evaluation Report (2024), see the FATF website for the full assessment. Prior Mutual Evaluations (2016) and Follow-Up Reports (2019) contain earlier, now-superseded findings.

Key Gaps & Risks

• The SEC has not clarified whether state trust companies can serve as "qualified custodians" under the Advisers Act, creating uncertainty for advisers seeking compliant custodians. The June 30, 2021 no-action letter to the Wyoming Division of Banking remains in effect (it has not been publicly withdrawn), but the scope of reliance is limited to the specific facts of that letter. SEC.gov | Cultivating Confidence

• "Relatively few custodians serve the

Sources

• SEC.gov | Staff Responses to Questions About the Custody Rule
• SEC.gov | Custody of Investment Company Assets Outside the United States
• Proposed rule: Safeguarding Advisory Client Assets
• SEC.gov | Custody of Funds or Securities of Clients by Investment Advisers
• Final Rule: Custody of Funds or Securities of Clients by Investment Advisers; Release No. IA-2176
• FACT SHEET Proposed Safeguarding Rule
• SEC.gov | Staff Accounting Bulletin No. 121
• SAB No. 122
• SEC.gov | Out of the Gray Zone
• SEC.gov | Form Custody for Broker-Dealers
• FATF Mutual Evaluation Report United States (2024)
• Conformed to Federal Register version, IA-5248
• SEC.gov | Custody of Funds or Securities of Clients by Investment Advisers
• SEC.gov | WITHDRAWN: Staff Statement on WY Division of Banking
• SEC.gov | Cultivating Confidence
• IRS Instructions for Form 1099-B
• IRS Publication 1281