The SEC is turning crypto custody into a fight over asset coverage

If adopted, the result would be a more competitive custody market in which regulatory status still matters, but no longer answers the commercial question by itself. Crypto-native custodians could gain a clearer route to institutional clients, while banks would have to defend relationships on asset coverage, service breadth and integration with the rest of a client’s portfolio.

Coinbase, Gemini and Fireblocks get a clearer lane

Coinbase, Gemini and Fireblocks have spent years building regulated custody businesses around trust charters rather than conventional commercial-bank models. Coinbase Prime custody is provided through Coinbase Custody Trust Company, a New York-chartered trust company regulated by NYDFS that advertises support for more than 470 assets. Gemini Custody operates through Gemini Trust Company, while Fireblocks has added its own NYDFS-chartered Fireblocks Trust Company alongside the wallet and transaction infrastructure it already sells to institutions.

The SEC gave firms like these an interim opening last year when staff said it would not recommend enforcement against advisers and funds treating qualifying state trust companies as permitted crypto custodians. The new proposal would put state trust companies directly into the rules, subject to safeguarding policies, financial audits, internal controls and asset segregation. That does not erase the value of a federal charter, but it reduces the degree to which regulatory status alone can separate one provider from another.