Tax insight

SEC action opens door to additional proliferation of crypto assets in exchange-traded and public funds

Insight
5 minute read
October 24, 2025

What happened?

The Securities and Exchange Commission (SEC) on September 17, 2025, approved proposed rule changes to adopt generic listing standards for exchange-traded products (ETPs) that hold commodities, including crypto assets.

On September 30, 2025, the SEC staff issued a no-action letter confirming that state-chartered trust companies can be treated as ”banks” for custody purposes under the Investment Company Act of 1940 and the Investment Advisers Act of 1940.

Why is it relevant?

The relief within the no action letter addresses uncertainty around custody requirements in crypto investments for funds regulated under the 1940 Act. This unlocks new possibilities for regulated investment companies (RICs) and business development companies (BDCs) to engage in digital asset strategies.

What’s next?

The ability to stake within ETPs will tighten the gap with the industry's dominant bitcoin ETPs making these funds more marketable and competitive. One remaining hurdle is the lack of clarity if an ETP can maintain grantor trust status for tax while staking.

Despite the SEC’s no action letter, holding significant amounts of crypto directly in a RIC remains impractical due to income classification issues under Section 851(b)(2). Funds will still use derivatives and blockers for crypto exposure. However, this change will remove impacts of immaterial direct investment and opens doors for additional indirect or synthetic exposure.