Regulatory Update: SEC Guidance on Custody of Digital Asset Securities / (SEC Request for Comment)

On December 23, 2020, thehe SEC issued a statement (Custody of Digital Asset Securities by Special Purpose Broker-Dealers) outlining how broker-dealers must operate when acting as custodians of digital asset securities in order to avoid enforcement action.  Ref: https://www.sec.gov/rules/policy/2020/34-90788.pdf

In July 2019, the SEC issued a joint staff statement with FINRA that highlighted the importance of compliance by broker-dealers custodying digital assets with Rule 15c3-3 of the Securities Exchange Act of 1934 (the Customer Protection Rule). The Joint Statement had emphasized how digital asset securities are susceptible to being lost due to cyberfraud, cybertheft, loss of a private key, or a faulty blockchain transaction.  Ref: https://www.sec.gov/news/public-statement/joint-staff-statement-broker-dealer-custody-digital-asset-securities

SIFMA has previously critizized for lack of guidance.  Review thier Paper here:  (Current Regulatory and Operational Considerations for Broker-Dealers and a Look Towards the Future), RE: https://www.sifma.org/wp-content/uploads/2020/11/Securitytokens-Paper.pdf