Rule 206(4)-2

Definition ∞ Rule 206(4)-2, also known as the Custody Rule, is a regulation under the Investment Advisers Act of 1940 issued by the U.S. Securities and Exchange Commission. It requires registered investment advisers who have custody of client funds or securities to implement specific safeguards. These safeguards include maintaining client assets with a qualified custodian, undergoing annual surprise examinations, and providing account statements to clients. The rule protects investors from fraud and mismanagement of their assets.
Context ∞ The application of Rule 206(4)-2 to digital assets has been a significant area of focus for the SEC, particularly concerning what constitutes “custody” of cryptocurrencies and which entities qualify as custodians. Discussions often involve the technical complexities of holding digital assets and the need for clarity on how existing regulations apply to this new asset class. A critical future development involves potential amendments or interpretive guidance from the SEC to address the unique characteristics of digital assets under this rule. News frequently covers the SEC’s enforcement actions and policy statements related to investment advisers’ digital asset custody practices.

→State Trust

→Structure

→Asset Custody

SEC Staff Permits State Trusts as Qualified Digital Asset Custodians

The Staff's no-action relief provides a critical compliance pathway, enabling SEC-registered investment advisers to utilize state-chartered trust companies as qualified digital asset custodians.

A complex metallic and luminous blue circuit structure, partially covered in granular white snow, dominates the view. A central, polished silver and blue component resembles a network node or validator core, radiating intricate, glowing blue circuit board pathways. These pathways, indicative of blockchain architecture and data immutability, are encrusted with frost, metaphorically representing the "frozen" state of on-chain data after transaction finality. This visual suggests a robust, high-performance consensus mechanism operating within a secure, potentially high-density distributed ledger technology environment, where cryptographic proof is essential for maintaining integrity and security.

→Investment Advisers Act

→Safeguarding Rule

→Client Assets

SEC Staff Clarifies Crypto Custody Rule for State Trust Companies

The SEC's no-action relief operationalizes the Custody Rule for RIAs, legitimizing state-chartered trust companies as qualified digital asset custodians under strict controls.

A transparent, fluid-filled vessel displays dynamic blue liquid and effervescent bubbles, set within a sophisticated metallic and dark blue framework. This visual metaphor illustrates the intricate processes of a smart contract execution. The swirling blue elements symbolize the transaction flow and data packets within a decentralized network. Bubbles represent individual cryptocurrency transactions or oracle data inputs, actively processed within a secure on-chain protocol environment. The robust, high-precision base suggests a layer-2 scaling solution or an enterprise blockchain infrastructure, emphasizing system integrity and efficiency in digital asset management.

→Risk Control

→Compliance

→Financial Institution

SEC Staff Expands Qualified Custodian Definition for Institutional Crypto Asset Custody

The No-Action Letter provides a crucial regulatory pathway for Registered Investment Advisers to custody digital assets with state-chartered trust entities.

A detailed view of a blue, textured, modular hardware unit reveals intricate internal mechanisms. Metallic components and precise circuitry suggest advanced cryptographic processing. Circular indicators on the lighter blue surface might represent secure multi-party computation status or public-key infrastructure elements. The robust design implies a dedicated hardware wallet or a validator node component, engineered for immutable ledger integrity and decentralized network security. This device embodies resilient DLT infrastructure.

→Compliance Program

→Regulatory Clarity

→Operational Resilience

SEC Staff Confirms State Trust Companies Qualified Digital Asset Custodians

The SEC's no-action relief operationalizes institutional digital asset custody by clarifying the "qualified custodian" status for state-chartered trust companies.

A complex, interconnected structure of translucent blue elements, reminiscent of a blockchain node or network topology, is depicted. The elements appear to twist and intersect, forming a central nexus. A fine, granular white substance, akin to frost or cryptographic primitive particles, adheres to the surfaces, suggesting data encapsulation or a security protocol. The visual emphasizes distributed ledger architecture and computational integrity, with the blue pathways potentially representing transaction validation streams within a decentralized network.

→Assets

→Institutional Finance

→Segregation of Assets

SEC Staff Expands Qualified Custodian Definition for Digital Assets

The SEC's custody clarification unlocks institutional capital by validating state-chartered trust companies as qualified custodians for crypto assets.

A vibrant, faceted blue crystalline structure, resembling an intricate DLT architecture or smart contract logic, is partially enveloped by a textured white foam. This foam suggests a protocol cleansing or transaction validation layer, ensuring data integrity within a complex cryptographic primitive. The sharp, reflective surfaces of the blue element contrast with the soft, granular texture of the foam, hinting at robust security mechanisms within a decentralized network against a blurred institutional backdrop.

→Operational Resilience

→Investment Advisers Act

→Custodial Services Agreement

SEC Staff Confirms State Trust Companies Qualify for Institutional Crypto Custody

This SEC staff position operationalizes institutional crypto custody, providing RIAs and funds a clear compliance pathway for asset safeguarding.

→Digital Asset Safeguarding

→Investment Adviser Compliance

→Regulatory Clarity

SEC Staff Permits Investment Advisers to Use State Trust Companies for Crypto Custody

This staff relief clarifies the qualified custodian standard for digital assets, immediately de-risking institutional RIA and fund custody operations.

A futuristic, metallic device with an open casing reveals intricate, glowing blue circuitry, suggesting active blockchain node operations. White, cloud-like material is integrated within the central processing core and around the exterior, possibly indicating an advanced cooling mechanism for high-intensity hashing power or a representation of cold storage for digital assets. This visualizes the complex decentralized ledger technology DLT infrastructure essential for transaction validation and maintaining network integrity through robust cryptographic primitives.

→Regulatory Clarity

→Securities

→Principles-Based Regulation

SEC Staff Permits State Trust Companies as Qualified Crypto Custodians

Institutional investors gain critical operational clarity as the SEC affirms State Trust Companies satisfy Qualified Custodian requirements for digital assets.

Rule 206(4)-2

SEC Staff Permits State Trusts as Qualified Digital Asset Custodians

SEC Staff Clarifies Crypto Custody Rule for State Trust Companies

SEC Staff Expands Qualified Custodian Definition for Institutional Crypto Asset Custody

SEC Staff Confirms State Trust Companies Qualified Digital Asset Custodians

SEC Staff Expands Qualified Custodian Definition for Digital Assets

SEC Staff Confirms State Trust Companies Qualify for Institutional Crypto Custody

SEC Staff Permits Investment Advisers to Use State Trust Companies for Crypto Custody

SEC Staff Permits State Trust Companies as Qualified Crypto Custodians

Incrypthos

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