Concurrently with these modifications, the SEC’s Division of Trading and Markets and FINRA’s Legal Department have officially rescinded their 2019 joint statement regarding broker-dealers holding digital asset securities, taking effect straight away.
The recently published FAQ by the Division of Trading and Markets provides guidance on how broker-dealers can adhere to current custody and capital regulations under Rule 15c3-3, clarifying differences between cryptocurrencies classified as securities and those not. Some main points include:
Rule 15c3-3(b) applies only to securities, not crypto assets that fall outside that category.
Digital asset securities can be controlled by broker-dealers under paragraph (c) of Rule 15c3-3, regardless of whether these assets exist in a certified or uncertificated format.
The Securities and Exchange Commission’s (SEC) 2020 Statement on Business Conduct Matters (SPBD) does not have to be followed strictly, but it provides a short-term protection, often referred to as a “safe harbor”. In this case, broker-dealers can opt to use their regular control measures instead.
When it comes to Exchange Traded Products (ETPs) related to cryptocurrencies, there’s an option for in-kind creation and redemption. However, any proprietary holdings of assets such as Bitcoin or Ether need to be accurately factored into the calculations for capital assessment.
The agency made it clear that only cryptocurrencies classified as securities fall under the Securities Investor Protection Act (SIPA). Cryptocurrencies not considered securities, even if stored at a brokerage firm insured by the SIPC, do not qualify for protection from this act. However, brokerages can manage risks of insolvency through designations under UCC Article 8 or other contractual agreements.
The agency explained that only certain types of cryptocurrencies are covered by the Securities Investor Protection Act (SIPA). If your cryptos aren’t considered securities, even if they’re kept at a brokerage firm with SIPC insurance, you won’t be protected. But brokerages can protect themselves from bankruptcy by using UCC Article 8 or other agreements.
It’s worth mentioning that the Securities and Exchange Commission (SEC) has given its approval for transfer agents to employ distributed ledger technology as their primary recording system. However, they must comply with all relevant federal securities laws.
In a significant move, the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) have withdrawn their 2019 joint statement on digital asset securities custody practices. This action indicates that the SEC is now adopting a more systematic and rule-based approach to regulation, replacing informal staff opinions with clearer, definitive guidelines for future reference.
This change highlights an increasing institutional acknowledgement of cryptocurrency holdings within the framework of broker-dealers and transfer agents, although under a stringent regulatory system. It is recommended that businesses reach out to the Securities and Exchange Commission’s Cryptocurrency Task Force or FINRA’s Cryptocurrency Regulatory Team for more detailed guidance.
Through these advancements, the Securities and Exchange Commission (SEC) has made a substantial stride in updating its regulatory structure to encompass digital assets, underscoring that legal certainty doesn’t necessarily diminish compliance risk. Managing cryptocurrency assets continues to be a challenging task, but one that is now more clearly defined.
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2025-05-17 15:35