U.S. SEC Staff Issues Long-Awaited Crypto Asset Securities Guidance for Carrying Broker-Dealers

Key Takeaways

• The SEC’s Division of Trading and Markets Staff issued long-awaited guidance on how carrying broker-dealers may demonstrate physical possession (“possession”) of crypto asset securities under Rule 15c3-3(b)(1).
• The guidance applies to all carrying broker-dealers, not only those operating under the Commission’s 2020 special purpose broker-dealer statement.
• The Staff stated it will not object to a broker-dealer deeming itself in possession if specified conditions are met, although the guidance is not a safe harbor and not legally binding.
• Access to and ability to transfer crypto asset securities on the relevant distributed ledger technology is central to possession, typically involving control of private keys.
• Broker-dealers must conduct ongoing diligence on the relevant blockchain and must not have custody of crypto asset securities if they are aware of material operational or security deficiencies relating to possession.
• The guidance leaves significant issues unresolved, including broker-dealer audit and financial responsibility obligations.
• Separately, the Staff clarified that ATS operators generally are not required to register as clearing agencies when clearing and settling crypto asset securities for their own customers and addressed regulatory considerations for crypto‑related pairs trading.

Overview of the SEC Staff Guidance

On December 17, 2025, the staff of the SEC’s Division of Trading and Markets (the, “Staff”) issued a statement, expressly limited in scope, regarding how broker-dealers that carry customer securities (“Carrying Broker-Dealers”) may evidence physical possession (“possession”) of crypto asset securities for purposes of Rule 15c3-3(b)(1) of the Securities Exchange Act of 1934 (the Customer Protection Rule).

The Staff emphasized that the statement addresses only the “possession” prong of Rule 15c3-3(b)(1) and does not address the “control” prong or other broker-dealer obligations under the federal securities laws, including broker-dealer financial responsibility rules. The statement does not have the force or effect of law.

The guidance applies to Carrying Broker-Dealers generally and is not limited to broker‑dealers operating under the Commission’s 2020 statement regarding special purpose broker-dealers, which was issued on a time-limited basis. The Staff described the guidance as an interim step while the Commission continues to assess broker-dealer custody of crypto asset securities, particularly following the withdrawal of the 2019 Joint Staff Statement regarding broker-dealer custody of digital asset securities.

Customer Protection Rule Background

Rule 15c3-3(b)(1) requires Carrying Broker-Dealers to “promptly obtain and shall thereafter maintain the physical possession or control of all fully-paid securities and excess margin securities carried by a broker or dealer for the account of customers.”

Consistent with Commission guidance dating back to the 1970s, a broker-dealer is required to take timely steps in good faith to establish physical possession of customer securities. The Staff’s statement provides a non-exclusive list of measures that the Staff stated it will not object to if a Carrying Broker-Dealer relies on them to deem itself in possession of crypto asset securities. The measures do not constitute a safe harbor.

Possession of Crypto Asset Securities

Under the Staff’s statement, a Carrying Broker-Dealer may deem itself to have physical possession of a customer’s fully paid or excess margin crypto asset security if it satisfies the following conditions:

Access to and Transferability of the Crypto Asset Security

The Carrying Broker-Dealer must have access to the crypto asset security and the capability to transfer the crypto asset security on the relevant distributed ledger technology. In practice, this typically involves access to the private keys necessary to sign transactions on the relevant blockchain.

Diligence and Policies Regarding Private Key Security

The Carrying Broker-Dealer must establish, maintain, and enforce written policies and procedures—consistent with evolving industry practices—to protect private keys from theft, loss, or unauthorized or accidental use. These controls should be designed to ensure that no other person, including the customer or any third party (including an affiliate), has access to the private keys or the ability to transfer the crypto asset security without the broker-dealer’s authorization.

Diligence Regarding the Relevant Blockchain and Network

Prior to establishing possession, the Carrying Broker-Dealer must conduct sufficient diligence to identify and assess risks and shortcomings associated with the relevant blockchain and distributed ledger network. This diligence obligation is ongoing.

A Carrying Broker-Dealer will be deemed not to have possession of a crypto asset security if it is aware of material operational or security deficiencies relating to the crypto asset security or its associated network. The Staff indicated that the focus is on material risks arising from custody or possession, not market or reputational risks.

Business Continuity and Disruption Planning

The Carrying Broker-Dealer must establish, maintain, and enforce written policies and procedures addressing events that could affect its possession of crypto asset securities, including blockchain malfunctions, 51% attacks, hard forks, and airdrops.

These policies must also allow the broker-dealer to:

• Comply with lawful orders to seize, freeze, burn, or prevent transfer of crypto asset securities; and
• Transfer crypto asset securities to a broker-dealer, trustee, receiver, liquidator, similar function, or other appropriate person in the event the broker-dealer can no longer continue business, self-liquidates, or becomes subject to a formal bankruptcy, receivership, liquidation, or similar proceeding.

Issues Not Addressed by the Guidance

The Staff’s statement leaves a number of issues unresolved. In particular:

• Carrying Broker-Dealers will need to work closely with their auditors to assess the impact of the guidance on financial reporting and audits.

Clearance and Settlement Guidance for ATSs

In a separate update to its Crypto Asset Activities and Distributed Ledger Technology FAQs, the Staff clarified that a broker-dealer operating an alternative trading system (ATS) generally is not required to register as a clearing agency solely because it clears and settles transactions in crypto asset securities for its own customers, provided the broker-dealer is engaging in customary brokerage or dealing activities.

Pairs Trading and USD Valuation

The Staff also addressed pairs trading, including trading strategies involving crypto asset securities paired with correlated non-security crypto assets (for example, Bitcoin and certain Bitcoin ETFs).

The Staff stated that pairs trading is permissible provided the relevant national securities exchange (NSE) or that ATS complies with applicable federal securities law requirements. NSEs engaging in such trading may need to amend exchange rules, and amendments to National Market System plans may be required.

ATS operators must appropriately disclose pairs trading activity in Form ATS or Form ATS-N, as applicable.

Recognizing that many crypto assets are not quoted in U.S. dollars, the Staff confirmed that ATSs may convert transaction values and order prices to USD using consistent, impartial, and reasonable methods commonly applied by market participants.

Practical Impact

Although the Staff’s statement is non-binding, it provides meaningful insight into the Staff’s current views. Broker-dealers may review and rely on the guidance without delay, while continuing to monitor for additional Commission or Staff action.