Statement Summary
The SEC’s Division of Trading and Markets has addressed frequently asked questions regarding crypto asset activities and distributed ledger technology. The responses clarify key regulatory aspects for broker-dealers, including the handling of crypto assets, custody compliance, and the obligations defined under existing securities laws. Notably, it explains that certain rules apply only to securities and not to non-security crypto assets, which lack protections under the Securities Investor Protection Act (SIPA). Guidance is also provided on transfer agents in relation to crypto securities, emphasizing that some may be required to register with the SEC depending on the services they provide. The SEC encourages inquiries about the application of its rules to crypto-related activities, stressing the importance of secure and accurate recordkeeping for investor protection.
Original Statement
The staff of the Division of Trading and Markets (the “Staff”) of the Securities and Exchange Commission (the “Commission”) has prepared the following responses to frequently asked questions relating to crypto asset activities and distributed ledger technology. These responses represent the views of the staff of the Division of Trading and Markets. They are not a rule, regulation, or statement of the Commission. The Commission has neither approved nor disapproved their content. These responses, like all staff statements, have no legal force or effect: they do not alter or amend applicable law, and they create no new or additional obligations for any person.
Broker-Dealer Financial Responsibility
Q1: Does paragraph (b) of Exchange Act Rule 15c3-3 apply to crypto assets that are not securities?
A1: No. Paragraph (b) of Rule 15c3-3 applies only to securities carried by a broker-dealer for the account of customers or for a proprietary securities account of another broker or dealer, known as a “PAB account.”
Q2: Could a broker-dealer establish control of a crypto asset that is a security via paragraph (c) of Rule 15c3-3?
A2: Yes. Although certain control locations reference a security being in certificated form, the Staff will not object if such crypto asset securities are not in certificated form when held at a qualifying control location.
Q5: Are crypto assets that are investment contracts treated as securities under SIPA and protected by SIPC if they are not registered under the Securities Act of 1933?
A5: No, SIPA defines “security” as any investment contract that is registered with the Commission. Therefore, unregistered investment contracts are not protected under SIPA.
Q6: Does SIPC protect customer claims for non-security crypto assets held by a SIPC member broker-dealer?
A6: No. SIPC protection extends only to “securities” as defined under SIPA.
Q8: If a broker-dealer conducts a non-security crypto asset business, are there methods to ensure adequate records are preserved?
A8: Yes. Prudent recordkeeping practices are essential for investor protection and may include keeping the same records for non-security crypto activities as for securities activities.
Transfer Agents
Q9: Is a person acting as a transfer agent for an issuer of a crypto asset that is a security required to register with the SEC as a transfer agent?
A9: Maybe. The need for registration depends on the services the entity is performing in relation to the crypto asset.
Q10: Could a registered transfer agent utilize distributed ledger technology as its official Master Securityholder File?
A10: Yes, provided the transfer agent complies with all applicable requirements under federal securities laws.
Staff welcomes questions regarding the application of the Commission’s transfer agent rules to crypto asset activities and distributed ledger technology and requests for interpretive or no-action letters relating to these issues.
