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Regulation and Compliance > Federal Regulation > SEC

SEC Seeks Feedback on BDs' Custody of Digital Assets

By Melanie Waddell

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The Securities and Exchange Commission is seeking comment on the custody of digital asset securities by broker-dealers.

In a Wednesday request, the agency said that it requests feedback “in order to encourage innovation around the application of Securities Exchange Act Rule 15c3-3 to digital asset securities.”

The agency also wants feedback to help it get up to speed on “the evolving standards and best practices with respect to custody of digital asset securities.” Such insights, the agency said, “will serve to inform any potential future Commission action in this space.”

The SEC statement sets forth the Commission’s position that, for a period of five years, a broker-dealer operating under the circumstances set forth in the statement will not be subject to a Commission enforcement action on the basis that the BD deems itself to have obtained and maintained physical possession or control of customer fully paid and excess margin digital asset securities for the purposes of paragraph (b)(1) of Rule 15c3-3.

“These circumstances, among other things, include that the broker-dealer limits its business to digital asset securities, establishes and implements policies and procedures reasonably designed to mitigate the risks associated with conducting a business in digital asset securities, and provides customers with certain disclosures regarding the risks of engaging in transactions involving digital asset securities,” it explained.

SEC staff will be seeking feedback on digital asset questions when proposed changes to the agency’s custody rule come before the commission. Karen Barr, president and CEO of the Investment Adviser Association, told ThinkAdvisor in a previous interview that she expects the SEC to release its proposed changes to the custody rule in the first quarter.

Rep. Patrick McHenry, R-N.C., ranking minority member on the House Financial Services Committee, said in a Wednesday statement that he’s “pleased the SEC has taken meaningful action today to support innovation in the digital securities market. Digital asset custody is a major outstanding regulatory issue, and I appreciate that the SEC is taking steps to allow for further market developments.”

Melanie Waddell

@Think_MelanieW

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