Trust Company

A trust company is a corporation that holds a charter allowing it to exercise fiduciary powers: to act as trustee, executor, custodian, escrow agent or investment manager for individuals, businesses and institutions. It holds legal title to, or safekeeps, property that belongs beneficially to someone else and must manage it in that person's interest. In the United States, trust companies are chartered and supervised by state banking departments or, at federal level, by the Office of the Comptroller of the Currency.

Many commercial banks have trust departments, but the term usually refers to a standalone institution whose business is limited to fiduciary and custody services. Such a company is often called a limited purpose or non-depository trust company. It has become an important licensing route for digital asset custodians, stablecoin issuers and some payment firms, because it offers a form of bank charter without the full requirements of a deposit-taking bank.

The traditional work of a trust company is the administration of personal trusts and estates, the safekeeping of securities and the role of corporate trustee for bond issues and pension plans.

What unites these services is the legal standard that applies. A trust company is a fiduciary. It owes duties of loyalty and care to its clients, must keep client property separate from its own, and may not use that property for its own benefit. Assets held in a fiduciary or custodial capacity do not appear on its balance sheet as its own and are not available to its creditors if it fails.

• State trust companies. Each state sets its own rules on permitted activities, minimum capital and supervision. South Dakota, Nevada, Delaware, Wyoming and New York are among the most used jurisdictions.
• Limited purpose trust companies. A charter restricted to specified fiduciary activities. New York's Department of Financial Services has used this form for firms conducting virtual currency business, as an alternative to the BitLicense.
• National trust banks. A national bank whose activities are limited to those of a trust company, chartered by the Office of the Comptroller of the Currency. It is one kind of special purpose national bank and can operate in every state under a single federal charter.
• Trust departments of banks. A full-service state chartered bank or national bank may be granted trust powers in addition to its banking business.

A non-depository trust company generally does not accept demand deposits from the public or make commercial loans. Because it takes no insured deposits, it normally does not need FDIC insurance, and its parent is typically not treated as a bank holding company under federal law. This makes the charter quicker and less costly to obtain than a full bank charter.

The trade-off is narrower powers. Cash that clients leave with a trust company is usually placed with insured banks or invested in short-term instruments on the client's behalf, not lent out. Access to central bank payment services is not automatic. A trust company that wants to settle payments directly must apply for a Federal Reserve master account, and institutions without deposit insurance face closer review.

Trust charters became prominent in the crypto industry for two reasons. First, investment advisers must keep client assets with a qualified custodian, a category that includes banks and has been understood by the industry to include supervised trust companies. Firms offering institutional crypto custody therefore sought trust charters to serve funds and advisers.

Second, a trust charter can substitute for other licenses. Under many state laws, a chartered trust company is exempt from the requirement to hold a money transmitter license, at least in its home state, and New York trust companies may conduct virtual currency activity with the regulator's approval. Several dollar stablecoins have been issued by New York limited purpose trust companies, with reserves held in segregated accounts under the regulator's reserve and redemption rules. Federal stablecoin legislation enacted in 2025 recognizes both state-qualified and federally approved issuers, and several firms in the sector have applied for national trust charters, which the OCC began to approve conditionally in December 2025.

Chartering authorities examine trust companies for the quality of their fiduciary administration, operations, technology, earnings and capital. Requirements commonly include a minimum capital requirement set by statute or by the regulator for the specific business plan, a board with fiduciary experience, internal audit, and policies for accepting accounts and managing conflicts of interest. Trust companies are subject to the Bank Secrecy Act and must run anti-money laundering programs with customer identification and suspicious activity reporting.

Operating across state lines can be complicated for a state trust company. Some states allow out-of-state trust companies to serve their residents on a reciprocal basis, while others require a local license or office. This is one reason firms with national ambitions pursue the federal charter.

A trust charter does not make a firm a bank in the everyday sense. Clients do not have insured deposits, and their protection rests on segregation, the quality of the firm's records and the supervision it receives. Bank trade groups and some state regulators have also objected to trust charters being used for payment and stablecoin businesses that look, in their view, more like banking than fiduciary work.

• Office of the Comptroller of the Currency
• Conference of State Bank Supervisors