The U.S. Securities and Exchange Commission (SEC) has issued new guidance clarifying how broker‑dealers can custody crypto assets. The statement gives Wall Street firms a more detailed rulebook for holding digital tokens on behalf of clients while keeping them inside existing investor‑protection frameworks.
What the SEC Clarified
The update explains that broker‑dealers may safekeep certain digital assets if they meet the long‑standing “customer protection rule,” which requires firms to segregate client property and maintain a reserve of high‑quality assets to back those holdings.
In the crypto context, that means firms must show that they can control the private keys for customer assets, prevent commingling with proprietary funds and maintain detailed, auditable records of every on‑chain and off‑chain movement.
Additionally, the SEC distinguishes between several token kinds. Cryptocurrencies that are securities are firmly within the broker-dealer system, although non-security tokens, like various types of Bitcoin and Ether exposures, would need further examination or parallel adherence to money-transmission or commodities regulations.
The guidelines emphasize that companies must exhibit end-to-end control, from onboarding to settlement to incident response, and cannot rely only on third-party wallets without strong management.
What the Guidelines Mean for Brokers, Exchanges and Investors
For traditional broker‑dealers, the clarification lowers some legal fog but raises the operational bar. Firms that want to offer direct crypto custody now face requirements for cold‑storage arrangements, multi‑factor key management, real‑time reconciliation and tested disaster‑recovery plans. They also need policies for forks, airdrops and network outages, as these events can affect whether an asset remains under full control and how it appears on customer statements.
The guidance complicates life for unregistered crypto exchanges that hoped to partner with broker‑dealers as a backdoor into the securities market. Brokers cannot simply “park” client tokens on external venues and claim compliance; they remain responsible for safeguarding assets and must treat outside providers as critical vendors subject to due diligence and ongoing monitoring.
For investors, the SEC’s move brings crypto custody closer to the standards that govern stocks and bonds. Clients who hold tokens through a registered broker‑dealer should receive clearer disclosures about where their assets sit, who controls the keys and how they would be treated if the firm fails.
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