The SEC issues guidance on broker-dealer custody of crypto assets and the operation of crypto ATS

The U.S. Securities and Exchange Commission (SEC) this week issued the latest staff statement through its Division of Trading and Markets, providing operational guidance on the custody of customer crypto assets by regulated broker-dealers, and simultaneously released a frequently asked questions document regarding crypto alternative trading systems (ATS).

Regarding custody, the SEC pointed out that as long as broker-dealers follow the informal standards outlined in the statement, including properly safeguarding customer private keys and considering scenarios such as blockchain failures, 51% attacks, hard forks, or airdrops in advance, the regulatory authorities will not take enforcement action. This guidance applies to crypto securities, including tokenized stocks and debt securities, but the relevant definitions still need further clarification. In addition, the SEC also raised regulatory concerns regarding the trading and settlement activities of crypto ATS. Hester Peirce, the head of the SEC's crypto working group and a commissioner, stated that trading platforms and market participants need to operate under clear market structure rules to promote a fair and orderly market environment without imposing unnecessary burdens.