On May 15, 2025, the Staff of the Division of Trading and Markets at the US Securities and Exchange Commission (SEC) issued responses to Frequently Asked Questions (FAQs) concerning Crypto Asset Activities and Distributed Ledger Technology. These FAQs offer guidance on crypto asset custody by broker-dealers and the use of blockchain by transfer agents to maintain Master Securityholder Files. Simultaneously, the SEC Staff and the Office of General Counsel of the Financial Industry Regulatory Authority (FINRA) announced the immediate withdrawal of a joint statement issued in July 2019 regarding broker-dealer custody of crypto assets. This withdrawal, alongside the new FAQs, forms part of the SEC’s broader initiative to clarify the regulatory framework surrounding various crypto asset activities. On May 19, SEC Chairman Paul Atkins, speaking at the SEC Speaks Conference, noted that he had directed staff to begin drafting formal crypto-related rule proposals, while continuing to clear prior staff-level guidance. The withdrawn Joint Staff Statement had highlighted significant challenges and risks for broker-dealers in custodying crypto asset securities, especially regarding compliance with federal securities laws. The new FAQs aim to clarify the application of these laws to crypto asset securities. **FAQs on Crypto Asset Activities and Distributed Ledger Technology** The guidance targets broker-dealers and transfer agents, addressing key issues as follows: - **Broker-Dealer Financial Responsibility:** Rule 15c3-3(b) of the Securities Exchange Act of 1934 (the Customer Protection Rule) applies only to securities and not to crypto assets that are non-securities. Broker-dealers can establish control over crypto assets classified as securities, even when uncertificated, if held at qualifying control locations. Compliance with the 2020 Special Purpose Broker-Dealer (SPBD) Statement is voluntary; it offers only a temporary safe harbor without amending the Customer Protection Rule. - Broker-dealer custody and capital requirements allow facilitating in-kind creations and redemptions connected to spot crypto exchange-traded products (ETPs).

Proprietary positions in underlying assets must be included in net capital calculations. Positions in bitcoin or ether may be deemed readily marketable for applying the 20% haircut rule under Exchange Act Rule 15c3-1. - Crypto assets that are investment contracts are not covered by the Securities Investor Protection Act of 1970 unless registered under the Securities Act of 1933. Therefore, the Securities Investor Protection Corporation (SIPC) does not protect customer claims for nonsecurity crypto assets held by broker-dealers. - To safeguard nonsecurity crypto assets in cases of broker-dealer insolvency, broker-dealers may enter agreements to treat such assets as “financial assets” under Article 8 of the Uniform Commercial Code. Additionally, broker-dealers engaged in nonsecurity crypto asset businesses should maintain records comparable to those for securities to ensure investor protection and facilitate audits. - **Transfer Agents:** Individuals acting as transfer agents for issuers of crypto asset securities may need to register with the SEC if they perform any of the five activities defined in Section 3(a)(25) of the Exchange Act, concerning securities registered or effectively registered under Sections 12 or exempted under certain conditions. - Registered transfer agents may employ distributed ledger technology as their official Master Securityholder File, provided they comply fully with applicable securities laws. They may keep transaction data on a blockchain while storing personal information off-chain, as long as records remain secure, accurate, current, and readily producible to the SEC. The Staff concluded by encouraging industry participants to engage with them, ask questions, and seek assistance regarding the application of broker-dealer and transfer agent rules to crypto asset activities and distributed ledger technology. **Withdrawal of Joint Staff Statement** Coinciding with the publication of the FAQs, the SEC Staff and FINRA withdrew the July 8, 2019 Joint Staff Statement on broker-dealer custody of crypto assets, effective immediately. The new FAQs adopt a more flexible stance on crypto asset custody, contrasting with the earlier statement that had cast doubt on broker-dealers’ ability to comply with Customer Protection and other rules. **Conclusion** The FAQs provide much-needed clarity for broker-dealers and transfer agents on the regulatory treatment of crypto asset securities. These developments underscore the SEC’s intent to transition from sporadic enforcement and informal guidance toward a more formalized, structured, and consistent regulatory framework for crypto assets.