U.S. Securities and Exchange Commission staff outlines when broker-dealers may treat custody of crypto asset securities as physical possession under Rule 15c3-3

The staff of the U.S. Securities and Exchange Commission’s Division of Trading and Markets issued a statement on how Rule 15c3-3 applies to broker-dealers that custody crypto asset securities for customers, including tokenized equity or debt securities. The statement says the Division will not object to a broker-dealer deeming itself to have “physical possession” of a crypto asset security in the circumstances described in the statement. The circumstances referenced include the broker-dealer maintaining policies, procedures and controls that are reasonably designed and consistent with industry best practices to protect private keys. The staff statement does not address the “control” prong of Rule 15c3-3, which the Division notes was addressed separately in an earlier FAQ that, in the staff’s view, permits establishing “control” of a crypto asset security by holding it through a control location specified in Rule 15c3-3(c). In a related statement, Commissioner Hester M. Peirce encouraged the Division to develop recommendations for Commission consideration on amendments to Rule 15c3-3 to address the custody of crypto assets.