SEC Issues Key Guidance Easing Crypto Asset Rules for Broker-Dealers and Transfer Agents
May 27,
2025 — In a
significant move toward modernizing regulatory oversight of digital assets, the
SEC’s Division of Trading and Markets issued a set of FAQs on May 15, 2025,
offering expanded guidance on how federal securities laws apply to crypto
activities conducted by SEC-registered broker-dealers and transfer agents. The
guidance reflects a notable softening of prior restrictions and is expected to
encourage broader market participation from both traditional financial
institutions and crypto-native firms.
Highlights of the New Guidance
1. Expanded Custody Permissions for Broker-Dealers
The FAQs clarify that broker-dealers may now custody crypto asset securities —
and even non-security crypto assets — for customer accounts, all within the
same legal entity. This is a sharp shift from the more restrictive 2020 SPBD
(Special Purpose Broker-Dealer) framework and the now-withdrawn 2019 Joint
Statement, which limited broker-dealer activity with digital asset securities
unless registered under a narrow custodial regime.
Importantly,
custody of crypto asset securities must still comply with SEC Rule 15c3-3
regarding possession and control, but now, such assets can be held with
qualified banks under "good control" standards — provided there are
safeguards like “no-lien” agreements in place.
2. In-Kind Crypto ETP Creations and Redemptions Permitted
The guidance also addresses a long-standing concern around spot crypto
exchange-traded products (ETPs). Broker-dealers are now permitted to facilitate
in-kind creations and redemptions of crypto ETP shares using crypto
assets like bitcoin and ether — a departure from the SEC’s earlier preference
for cash-only transactions.
The Staff
confirmed that bitcoin and ether used in this context can be treated as
"readily marketable" commodities, allowing broker-dealers to apply a
20% capital haircut under SEC Rule 15c3-1, rather than the 100% haircut
traditionally applied to less liquid or unregulated assets.
3. SIPA and Insolvency Treatment
While SIPA protection generally does not cover non-security crypto assets like
bitcoin or ether, the FAQs suggest that broker-dealers could use contractual
arrangements (e.g., opting into Article 8 of the Uniform Commercial Code) to
help protect customer assets in the event of insolvency.
4. Use of Blockchain by Transfer Agents
The FAQs also affirm that registered transfer agents may utilize distributed
ledger technology (DLT) to maintain master securityholder records. The SEC
allows for a bifurcated system — part of the data on-chain, part off-chain — as
long as the records remain secure, accurate, and accessible to regulators.
Additionally,
not all transfer agents working with crypto asset securities must register with
the SEC, depending on whether the securities they handle are “Section 12”
securities — the same standard that applies to traditional, non-crypto
securities.
Regulatory Tone Shift
Although
the FAQs are non-binding and do not carry the force of law, they represent a
significant change in tone from earlier SEC guidance. They suggest an evolving
openness by regulators to digital assets being integrated into traditional
financial infrastructure. Commissioner Hester Peirce described the guidance as
“incremental, not comprehensive,” but emphasized its value in signalling a more
constructive regulatory posture.
What It Means
Market
participants — including broker-dealers, asset managers, custodians, and
fintech companies — now have a clearer framework to expand crypto-related
services without needing to rely solely on SPBD registration. The move is
expected to accelerate institutional adoption and enhance regulatory engagement
in the digital asset space.
This development marks a key turning point in bridging crypto innovation with the requirements of U.S. financial regulation. Connect for further information.
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