On May 15, 2025, the staff of the Division of Trading and Markets (the “Staff”) of the Securities and Exchange Commission (“Commission”) released responses to frequently asked questions (“FAQs”) relating to crypto assets and distributed ledger technology (“DLT”). Specifically, these answers addressed SEC-registered broker-dealers and transfer agents with exposure to crypto assets and DLT. While the Commission flagged that these Staff statements have no legal force or effect, do not alter or amend applicable laws, and create no new or additional obligations, these statements do provide meaningful insights for industry participants.
The SEC also simultaneously withdrew its previous Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities (the “Joint Staff Statement”) which, in comparison to the recent FAQs, was more restrictive in allowing broker-dealers and transfer agents to participate in crypto assets and DLT.
Broker-Dealers: Rule 15c3-3 (Customer Protection Rule)
Rule 15c3-3 (the “Rule”) under the Securities Exchange Act of 1934 (the “Exchange Act”), otherwise known as the Customer Protection Rule, provides the custody requirements for SEC registered broker-dealers. In 2019 the SEC released the Joint Staff Statement (referenced above) that limited the ability for broker-dealers to custody crypto-assets. Then in 2020, the SEC released a statement titled Custody of Digital Asset Securities by Special Purpose Broker-Dealers (the “SPBD Statement”) which listed a series of situations where a broker-dealer would be deemed to not violate the Consumer Protection Rule. While this SPBD Statement remains in effect, the FAQs relax certain restrictive measures proscribed on broker-dealers with exposure to crypto assets previously announced, and the FAQs explicitly state that the SPBD Statement is not mandatory on broker-dealers that aim to custody crypto assets.
The highlights from the FAQs are as follows:
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Broker-Dealers with exposure to crypto assets do not have to follow any additional requirements in order to custody crypto asset securities. A broker-dealer that custodies non-crypto securities is capable of relying the Customer Protection Rule, and thus, a broker-dealer that desires to custody crypto assets that are securities can also rely on the Rule notwithstanding any statements in the SPBD Statement that could be interpreted otherwise.
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Similarly, the Securities Investor Protection Corporation (“SIPC”) does not protect investors who invest in crypto assets that are not securities. While SIPC does not ensure security for investors in non-security crypto assets, the Staff acknowledged that there are other ways to protect investors in the event that a broker-dealer becomes insolvent. For example, the broker-dealer may agree with investors that non-security crypto assets custodied by the broker dealer are “financial assets” under Article 8 of the Uniform Commercial Code. In this case, these assets would not become part of the broker-dealer’s estate in the event of insolvency.
Transfer Agents
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An entity providing services for crypto assets that are securities should (i) determine whether those securities are Section 12 Securities and (ii) analyze the services, functions, or activities they are performing with respect to those securities. The requirements to register with the SEC as a transfer agent does not hinge on whether an entity has a crypto asset business or not, just whether those assets are securities and whether the services provided trigger Section 3(a)(25) of the Exchange Act.
These FAQs follow a broader push by the SEC to provide regulatory guidance to the crypto asset industry. While the FAQs do highlight the need for further guidance, such as determining which crypto assets are securities, they provide a less restrictive set of guidelines for broker dealers participating in the crypto asset industry and legitimize of the use of DLT for crypto asset service providers.
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1 The FAQs state that this applies to broker-dealers holding proprietary interests in the underlying assets of exchange traded products (“ETPs), and thus, if other crypto asset ETPs launch, this list may expand.
