SEC Releases Crypto Custody Guidance as Regulators Greenlight Tokenization and Bank Charters

These developments mark a significant shift toward regulatory clarity for cryptocurrency firms and institutional investors.

SEC Issues New Custody Guidelines for Retail Investors

The Securities and Exchange Commission published an Investor Bulletin on December 12, 2025, explaining how retail investors can safely hold crypto assets. The guidance defines custody as the method through which investors store and access private keys—the passcodes that authorize transactions and prove ownership of digital assets.

The bulletin warns that losing a private key results in permanent loss of access to crypto assets. It distinguishes between hot wallets, which remain connected to the internet for convenience, and cold wallets, which use physical devices like USB drives to stay offline. Hot wallets expose users to cyber threats but enable faster transactions, while cold wallets offer stronger protection against hacking at the cost of portability.

For third-party custody options, the SEC cautioned that if a custodian is hacked, shuts down, or goes bankrupt, investors may lose access to their holdings. The agency noted that some firms rehypothecate customer assets by lending them out, while others pool customer holdings rather than segregating them individually.

The guidance comes as the crypto custody provider market is projected to reach $3.28 billion in 2025 and could grow to $7.74 billion by 2032, representing a 12.95% annual growth rate.

Source:@SECGov

In September 2025, the SEC’s Division of Investment Management issued a no-action letter allowing state trust companies to serve as qualified custodians for digital assets. These companies must maintain written policies for safeguarding crypto assets, segregate client holdings, and prohibit rehypothecation without written consent. Investment advisers must conduct annual due diligence and disclose material risks to clients before using state trust companies for custody services.

Five Crypto Firms Receive National Bank Charter Approvals

The Office of the Comptroller of the Currency granted conditional approval for five digital asset firms to obtain national trust bank charters on December 12, 2025. Circle’s First National Digital Currency Bank and Ripple National Trust Bank received approval for new de novo charters, while Paxos, BitGo, and Fidelity Digital Assets received approval to convert from state-regulated trust companies to federally regulated trust banks.

Circle, the issuer of the $78 billion USDC stablecoin, said the charter would enhance regulatory oversight of its reserve while enabling institutional custody services. Paxos, which has operated under a New York state charter since 2015 and issues the $3.8 billion PYUSD stablecoin, stated the federal platform would allow businesses to issue, custody, trade and settle digital assets with greater clarity.

National trust bank charters do not allow firms to take deposits, offer checking or savings accounts, or access FDIC insurance. Instead, they permit fiduciary activities including custody, settlement, payments and asset management. These five firms join Anchorage Digital, which became the first federally chartered crypto bank in 2021, and approximately 60 other national trust banks under OCC supervision.

The approvals represent a significant policy shift. The OCC received 14 de novo charter applications in 2025, nearly equaling the number received in the previous four years combined. However, traditional banking groups opposed the approvals. The Bank Policy Institute argued that companies intending to offer traditional banking activities should seek full-service bank charters instead of the lighter regulatory standards associated with trust charters.

Notably, Coinbase and Stripe’s Bridge were not among the firms receiving approval.

DTCC Receives SEC Green Light for Tokenization Pilot

The SEC issued a no-action letter to the Depository Trust Company on December 11, 2025, authorizing a three-year pilot program to tokenize traditional securities on blockchain networks. The approval allows DTCC, which custodies over $100 trillion in securities and processes $3.7 quadrillion in annual transactions, to offer tokenization services starting in the second half of 2026.

Eligible assets include Russell 1000 stocks, U.S. Treasury bills, notes and bonds, and major index-tracking exchange-traded funds. The tokenized securities will maintain the same legal rights, investor protections and ownership entitlements as their traditional counterparts.

DTCC will operate the service on pre-approved Layer-1 and Layer-2 blockchains, though specific networks have not been announced. Industry analysts expect Ethereum to be selected, as it currently hosts approximately 66% of the $18.48 billion tokenized real-world asset market. Tokens will only move between DTCC-registered wallets, and DTCC will maintain a root wallet to reverse or correct transactions if errors or misconduct occur.

The pilot aims to enable near-real-time settlement, reducing current T+1 settlement times to minutes or seconds. This could significantly decrease counterparty risk and operational overhead. Blockchain-based settlement could potentially cut settlement costs by up to 90% while providing 24/7 trading access and automated compliance through smart contracts.

DTCC has spent nearly a decade preparing for blockchain-based settlement through various initiatives. Project Ion, which ran from 2020 to 2023, developed a distributed ledger technology settlement system processing up to 100,000 transactions daily. In April 2025, DTCC launched a blockchain-based platform for tokenized collateral management to improve efficiency and enable real-time settlement.

The SEC granted DTCC temporary exemptions from several compliance requirements, including provisions of Rule 17Ad-22 governing infrastructure reliability and security. In exchange, DTCC must provide quarterly reports covering participation numbers, tokenized asset values, blockchain selections, operational outages, registered wallet counts and any use of reversal authority.

Global Blockchain Settlement Infrastructure Expands

Major financial institutions worldwide are building blockchain infrastructure for tokenized assets. Swift announced a partnership with Consensys and over 30 major banks on September 29, 2025, to create a blockchain-based ledger for real-time cross-border payments. The system will combine payment messaging and settlement into one process, addressing the slow and expensive nature of current multi-intermediary systems.

The London Stock Exchange launched the Digital Markets Infrastructure platform on September 15, 2025, becoming the first major global exchange to deploy a working blockchain system handling real transactions. The platform completed its inaugural transaction within hours of going live, with investment firm MembersCap using it to raise capital for a tokenized reinsurance fund.

In Europe, Börse Stuttgart launched Seturion on September 4, 2025, as the continent’s first pan-European settlement platform for digital assets. The system promises to reduce settlement costs by up to 90% while connecting multiple trading venues across Europe.

Europe’s largest asset manager, Amundi, made history by launching the first tokenized money market fund on Ethereum on November 4, 2025. The €5 billion fund allows investors to choose between traditional shares or blockchain-based tokens, both providing access to the same underlying investments. The total value of tokenized assets reached $36.11 billion as of November 28, 2025, up from just $770 million at the end of 2023.

Bridging Traditional Finance and Digital Innovation

The convergence of regulatory approval, institutional infrastructure and technological advancement signals a fundamental shift in how financial markets operate. The SEC’s willingness to provide clear guidance on custody requirements, approve blockchain-based settlement pilots, and allow crypto firms to obtain federal bank charters represents a departure from the enforcement-heavy approach of previous years.

These developments create opportunities for traditional financial institutions to offer digital asset services while maintaining regulatory compliance and investor protections. As blockchain technology demonstrates its capability to reduce settlement times, lower costs and increase transparency, the financial industry appears positioned for continued integration of traditional and digital asset systems throughout 2025 and beyond.