SEC Clarifies Custody Requirements for Crypto Asset Securities
In a significant regulatory development, the U.S. Securities and Exchange Commission (SEC) has clarified the custody requirements for broker-dealers handling crypto asset securities. This change aims to eliminate years of uncertainty surrounding regulatory expectations and establish clear operational guidelines. Released on December 17, 2025, the new staff statement from the SEC’s Division of Trading and Markets specifies that broker-dealers must maintain sole control over crypto assets by managing the private keys that enable access and transaction of these digital securities.
Key Custody Requirements
According to the SEC, merely holding crypto assets does not signify custody; broker-dealers must have unfettered access to the assets recorded on a blockchain and possess the capability to transfer them independently. The guidance is rooted in existing regulations under paragraph (b)(1) of Rule 15c3-3, which typically requires firms to retain physical control or ownership of fully paid and excess margin securities. While the statement does not introduce a new regulatory framework, it provides clarity on how the existing rules apply to digital securities.
The SEC emphasizes that broker-dealers sharing access to private keys with clients or third parties undermines their custody status.
Moreover, prior to accepting custody, firms are required to meticulously evaluate the blockchain networks associated with the securities and conduct these reviews periodically. This includes assessing security measures, governance structures, performance metrics, and potential risks related to things like hard forks and protocol alterations that could impact ownership records. If broker-dealers identify serious vulnerabilities affecting security or operations within a blockchain, they must acknowledge that they do not have custody of the asset.
Impact on Broker-Dealers
This shift in policy comes after an extended period during which many broker-dealers argued that custodial processes for cryptocurrencies were practically infeasible under the SEC’s previous interpretations. From 2022 to 2024, regulatory guidelines imposed strict financial and structural conditions, deterring traditional investment firms from entering the crypto realm. Staff Accounting Bulletin 121, for example, required public companies that hold customer crypto to treat those assets as balance-sheet liabilities, creating a capital burden that many banks found unmanageable.
Moreover, existing regulations previously limited crypto custody to specialized broker-dealers that could not engage in regular securities business. Many major firms opted against pursuing this model due to complexity and lingering regulatory doubts, leading to a period described by industry experts as a regulatory limbo where compliance was necessary yet often unachievable.
Recent Guidance and Investor Protection
The latest guidance appears to attempt to bridge this gap by focusing on practical custody controls rather than vague issues surrounding blockchain technology. Coinciding with the custody statement, the SEC also issued an investor bulletin regarding crypto wallets and custody on December 13, 2025. This bulletin provided insights into risks and advised on best practices for securing digital assets, encompassing issues such as asset commingling and the pros and cons of different wallet types, reflecting a more instructive stance from the SEC.
Together, these recent announcements mark a pivotal moment for the SEC’s framework regarding crypto market infrastructure, presenting clearer standards for broker-dealers and enhancing safety measures for investors.
