- SFOX, a crypto prime dealer, has become the first crypto firm to win approval to become a trust charter in Wyoming.
- A trust charter from the crypto-friendly state allows firms to offer fiduciary and custodial services.
- Crypto exchange Kraken won a Wyoming bank charter in 2020.
Crypto prime dealer SFOX has become the first cryptocurrency company to receive approval to become a trust in Wyoming, marking a win that the firm told Insider will allow more institutions to engage with the $2 trillion market.
SFOX recently told Insider the Wyoming Division of Banking approved its trust charter application in October after a 10-month process. The approval is part of a wider effort by Wyoming to attract crypto-focused businesses and individuals to the state by providing legal clarity. Laws passed in the state since 2018 include the exemption of digital assets from property and sales taxes.
The chartered trust will operate as the SAFE Trust Company Inc.
SFOX, which primarily works with hedge funds and institutional clients, runs a digital asset platform that aggregates liquidity from more than 30 exchanges and over-the-counter desks. It has access to bitcoin, ether, solana, and other crypto markets and counts Chamath Palihapitiya’s Social Capital and startup incubator Y Combinator as backers.
The trust approval gives SAFE the green light to act in various fiduciary roles, including as a direct trustee. The charter allows SFOX customers to interact with a regulated platform that offers additional protection under the trust, the company said. Wyoming’s trust charter overall marks “a big step” for the crypto industry in part as it enables individual retirement accounts, companies offering IRA services, hedge funds, and other institutions access to the blockchain and digital-asset market, Akbar Thobhani, co-founder and CEO of SFOX’s SAFE Trust entity, said in an interview with Insider.
That’s significant considering there was roughly $19 trillion worth of assets in traditional IRA accounts in the US in 2020 and a lot of that money was unable to access or be involved with crypto, he said. With the trust charter, he said SFOX can help its clients to manage not only their US dollar-based assets but their crypto-based assets, as well.
“If you are a hedge fund and you are an asset manager managing money from your [limited partnerships], you need to make sure that you’re keeping that money in a regulated platform,” Thobhani said.
The charter also lets SFOX offer a range of “unique instruments” to its customers, from staking to lending and borrowing. Its platform can also custody hundreds of digital assets and NFTs. The Wyoming license will allow SFOX to introduce ideas such as staking to clients. Crypto staking is a process under which investors can lock up their assets to earn passive income. JPMorgan last year estimated staking was $9 billion business that could reach $40 billion by 2025.
“Apart from borrowing, lending and staking services, being able to have a good foundation for the Web3 space, being able to support more tokens, being able to support DeFi projects as well as NFT custody,” are key advantages to receiving the trust license, Sarah Tulin, SFOX’s assistant vice president of sales and strategy, told Insider.
The company’s US clients will “not [have to] worry about outages, exchanges going out, [or an] inability to access funds, as it’s protected by the trust,” she said.
Banks, for one, have been heavily investing in the area of crypto custody, according to findings last year by analytics company Blockdata. Companies selling custodial services look after their clients’ digital assets for a fee.
Crypto exchange Kraken in 2020 became the first crypto firm to land approval for a bank charter under Wyoming’s establishment of a special purpose depository institution charter in 2019.
Wyoming bitcoin proponent Senator Cynthia Lummis in January asked the Federal Reserve Chairman Jerome Powell for support from the Fed in approving crypto banks in her home state.