On May 15, 2025, the staff of the Securities and Exchange Commission (“SEC”) Division of Trading and Markets (the “Staff”) published responses to certain frequently asked questions (“FAQs”) relating to crypto asset activities and distributed ledger technology as they relate to broker-dealer financial responsibility and transfer agent activities. Importantly, the Staff’s responses to the FAQs have no legal force or effect, do not alter or amend applicable law, and do not create new or additional obligations.
Notably, in regard to broker-dealer financial responsibility, the Staff confirmed that a broker-dealer carrying crypto asset securities for a customer account or a proprietary securities account for another broker-dealer (known as a PAB account) may establish control under paragraph (c) of SEC Rule 15c3-3. In this regard, the Staff stated that the SEC’s 2020 statement “Custody of Digital Asset Securities by Special Purpose Broker-Dealers”, which sets forth a temporary SEC position or “safe harbor” that a broker-dealer, subject to the conditions set forth therein, would not be subject to enforcement action by the SEC on the basis that the broker-dealer deems itself to have obtained and maintained physical possession or control of customer fully paid and excess margin securities, did not amend SEC Rule 15c3-3 (or any other rule), and, therefore, broker-dealers may establish control under SEC Rule 15c3-3(c). Moreover, the Staff noted that although certain “control locations” in SEC Rule 15c3-3(c) reference a security being in certificated form to establish control, the Staff will not object if crypto asset securities are not in certificated form when held at an otherwise qualifying control location.
The Staff further stated that broker-dealer custody and capital requirements do not prohibit a broker-dealer from facilitating in-kind creations and redemptions in connection with a spot crypto exchange-traded product (“ETP”). Broker-dealers taking proprietary positions in the assets underlying an ETP would need to account for those assets in their net capital calculations. In this regard, the Staff stated that it will not object if a broker-dealer treats a proprietary position in bitcoin or ether as being readily marketable for purposes of determining whether the 20% haircut applicable to commodities under Appendix B of SEC Rule 15c3-1 applies.
With respect to non-security crypto assets held for customers by a broker-dealer, because such assets generally are not protected by the Securities Investor Protection Act of 1970 (“SIPA”) (and may not be protected by any other specific insolvency regime) and customers may therefore be exposed to loss of such assets in the event of an insolvency of the broker-dealer, the Staff discussed potential ways to help ensure that such assets will be returned to customers if the broker-dealer becomes insolvent. For example, the Staff stated that a broker-dealer may agree with its customers that non-security crypto assets custodied by the broker-dealer for purposes of Article 8 of the Uniform Commercial Code be treated as “financial assets” and carried in a “securities account ” (as those terms are defined in Article 8), which could help ensure that such assets do not become part of the broker-dealer’s estate if the broker-dealer is placed in a liquidation under SIPA or the Bankruptcy Code. Moreover, the Staff reminded broker-dealers that it “views prudent recordkeeping practices as being essential for investor protection in the operation of a broker-dealer, to perform an audit or examination of the broker-dealer, and for a trustee appointed under SIPA or otherwise to liquidate the broker-dealer.” A broker-dealer that conducts a non-security crypto asset business could make and keep the same records for its non-security crypto activities as it does for its securities activities.
In regard to transfer agents, the Staff stated that a person acting as a transfer agent for an issuer of crypto asset securities may have to register with the SEC as a transfer agent if certain criteria are met under Section 3(a)(25) of the Securities Exchange Act of 1934 (the “Exchange Act”). While the Staff’s guidance clarifies the obligations of those who perform specified activities with respect to crypto asset securities, it does not address the licensure requirements and restrictions that may apply to persons performing similar activities that are regulated under state law (e.g., N.Y. Banking Law § 131). The Staff also confirmed that a transfer agent could use distributed ledger technology to maintain its official master securityholder file, or a component thereof, if it complies with the requirements of Sections 17(a)(1) and 17(b) of the Exchange Act and the rules thereunder.
The full FAQ can be found here: Division of Trading and Markets: Frequently Asked Questions Relating to Crypto Asset Activities and Distributed Ledger Technology.
Also on May 15, 2025, the staffs of the SEC’s Division of Trading and Markets and the Office of General Counsel of the Financial Industry Regulatory Authority, Inc. withdrew their July 8, 2019 Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities effective immediately.