The SEC has up to date its Crypto Asset FAQs to make clear how broker-dealers akin to Morgan Stanley and Goldman Sachs meet custody and capital necessities for crypto securities and deal with how the framework applies to Bitcoin and Ethereum ETF exercise.
This replace seems within the Buying and selling and Markets FAQ Index as “Steadily Requested Questions on Cryptoasset Actions and Distributed Ledger Expertise (Might 15, 2025) – Up to date December 17, 2025.”
This gives firms with up-to-date references posted by their workers, because the custody design turns into the gate merchandise for tokenized securities distribution and ETP market making.
How the SEC’s Newest Custody Steering Reshapes Dealer Administration of Cryptoassets
Within the FAQ textual content, the workers reiterates that Rule 15c3-3(b)’s “possession or management” doesn’t apply to non-securities held by a broker-dealer, and that non-securities are outdoors the mechanism of buyer safety rules relevant to securities custody.
Within the case of crypto-asset securities, a broker-dealer can set up “management” underneath Rule 15c3-3(c) through the use of a professional place of management even when the instrument just isn’t licensed, the workers stated.
The workers additionally acknowledged that this strategy would scale back reliance on the particular function broker-dealer (SPBD) secure harbor as the first route for demonstrating management of those securities.
The workers additionally stated it will not object to broker-dealers facilitating the creation and redemption of bodily property in the event that they handled their proprietary positions in Bitcoin and Ether as “readily marketable” for pure capital functions.
This is applicable the 20% product haircut underneath Rule 15c3-1 Appendix B when calculating the deduction.
These workers positions are actually being positioned in parallel with the formal clean-up of earlier messages.
How SEC withdrawal will reshape “management” in crypto asset custody
The 2019 SEC and FINRA joint workers assertion relating to custody of digital asset securities by broker-dealers has been withdrawn on the SEC’s retraction web page and a parallel discover has been posted by FINRA.
With this withdrawal, the “north star” of custody by broker-dealers shall be restricted to the FAQ framework and using the present place of custody idea for crypto-asset securities.
Probably the most delicate query operationally is what is definitely required to fulfill the idea of “management” in Rule 15c3-3(c) when securities are recorded on a blockchain.
Though the FAQ doesn’t say that broker-dealers should preserve personal keys, 15c3-3(c) controls are tied to securing and directing the motion of shoppers’ securities at a acknowledged place of management.
For on-chain tools, it usually corresponds to who can signal or drive signatures by way of the custody stack.
Examples embrace key supplies in an HSM maintained by a broker-dealer, a financial institution custodial location the place the broker-dealer has documented management rights, or a multi-signature association the place the broker-dealer’s signature authority and procedures are designed to fulfill the expectations of the custodial location.
The legislation agency’s abstract emphasizes that the workers strategy permits common broker-dealers to develop their path to proof administration with out counting on SPBD standing because the default place.
In keeping with Sullivan & Cromwell and Sidley Austin, this shift will end in a larger emphasis on contract language, key governance, and audit trails that display controls over time.
At ETP Rail, our “readily marketable” stance on proprietary Bitcoin and Ether positions is tied on to intraday stock economics for licensed contributors and market makers supporting the bodily basket.
The capital effectivity sketch factors us in that course. If an affiliated broker-dealer holds a mean intraday stock of $50 million in BTC or ETH to facilitate creation and redemption, a 20% commodity haircut would imply a web capital deduction of roughly $10 million related to that stock.
Whereas this calculation just isn’t a whole web capital mannequin, it explains why some desks favor money workflows and why workers therapy makes spot buying and selling extra viable for firms with skinny spreads.
Financial institution partnerships may additionally face extra procedural tripwires than in earlier cycles
On April 24, 2025, the Fed rescinded a earlier supervisory letter that had set advance discover expectations for sure crypto-assets and greenback token exercise, transferring banks’ involvement to extra routine supervisory channels.
For broker-dealers that depend on financial institution subcustody as a path to custody, this shift is vital as a result of it shortens the trail from idea to supervisory conversations on the financial institution facet.
Dealer-dealers nonetheless should display 15c3-3(c) administration and data in a way that may be examined by examination groups.
Over the subsequent 12 to 18 months, the custody market is prone to concentrate on which constructions create reproducible proof of management whereas containing cyber and operational publicity.
Broadly talking, that is usually decided by whether or not the broker-dealer has direct management over the first materials or demonstrates management by course by way of a professional third-party location of management.
Every possibility trades off governance burden, incident response design, and examiner consolation.
| State of affairs (12-18 months) | The place management resides (signature or course authority) | Key operational advantages | Predominant execution dangers |
|---|---|---|---|
| Dealer-dealer self-custody | Dealer-dealer managed keys (HSM or multisig) | 15c3-3(c) Direct proof of management | Cyber controls, insurance coverage limits, and large-scale auditability |
| Financial institution sub-custodian with authority to direct broker-dealers | The broker-dealer directs the motion with the financial institution because the place of management. | Custody boundaries acquainted to incumbents | Contract phrases and techniques should display incident management |
| Cryptocurrency custodian know-how utilizing a financial institution or belief wrapper | Specialised instruments, contract-based controls | Integration pace for tokenized safety workflows | Consistency of certification and supervision of areas of management and areas of management |
| Good contract escrow with switch agent co-signing | Multisig between broker-dealer and switch agent | Programmable controls for company actions | How examination groups check ‘controls’ and record-keeping over time |
The Dec. 17 replace additionally holds a transparent line for retailers. Non-security cryptocurrencies held by broker-dealers stay outdoors the scope of Rule 15c3-3(b).
Firms nonetheless require clear disclosure of which protections apply and which don’t.
Whereas framing the workers FAQ as incremental, Commissioner Hester Peirce famous how this steerage may cut back friction for market contributors looking for to suit on-chain actions into current rulesets.
For compliance groups, the near-term data of whether or not the SEC FAQ index will bear additional edits is tangible.
One other vital sign is whether or not FINRA’s interpretation evolves towards a standardized examiner guidelines for on-chain management proof and books and data.