An Incremental Step Along the Journey: The Division of Trading Markets’ Frequently Asked Questions Relating to Crypto Asset Activities and Distributed Ledger Technologies

Commissioner Hester M. Peirce

May 15, 2025

Today, the staff of the Division of Trading and Markets issued a set of frequently asked questions (“FAQs”) relating to the application of certain broker-dealer financial responsibility rules and transfer agent rules to crypto asset activities and distributed ledger technology. Many of the responses to these FAQs should not be controversial, as they simply reiterate what our rules already say or do not say. Nonetheless, given the uncertainty in the market regarding the application of our rules to crypto generally, I am pleased that the staff has issued these helpful FAQs.

As one example, these FAQs address staff’s views about whether and how broker-dealer custody and capital rules apply to crypto assets, including in the context of in-kind creations and redemptions for spot crypto asset exchange-traded products (ETPs). The FAQs note that the possession and control requirements of Rule 15c3-3 are not implicated if a broker-dealer holds non-security crypto assets for customers. These requirements apply only to securities. The FAQs also address the net capital treatment of proprietary positions in bitcoin and ether, which are the only two crypto assets currently underlying crypto asset ETPs trading on national securities exchanges. The statement’s limitation to the capital treatment of bitcoin and ether does not mean that broker-dealers may hold only those crypto assets or that only those crypto assets may be readily marketable for purposes of the net capital rules.

The FAQs highlight that non-security crypto assets held by a broker-dealer are not protected by SIPA. SIPA is fundamentally tailored to securities, not commodities or other assets. These FAQs, by underscoring the absence of SIPA protection, remind investors about the risks they may face when holding non-security crypto assets through a broker-dealer.

The FAQs also include questions relating to transfer agents. Notably, the FAQs address a registered transfer agent’s use of distributed ledger technology as its official Master Securityholder File or a component thereof. This FAQ may be relevant for firms (and their transfer agents) considering issuing tokenized securities.

These FAQs are incremental, not comprehensive. The staff and the Commission still have much more work to do. For example, many market participants have urged us to replace the special purpose broker-dealer statement with a more fit-for-purpose statement addressing how broker-dealers may custody crypto assets that are securities, including tokenized versions of traditional securities. In the meantime, the SPBD continues to be a non-exclusive safe harbor upon which broker-dealers can rely. In addition, market participants have asked for guidance on the net capital treatment of other crypto assets. I also am eager to hear whether the industry believes additional clarity or other actions by the SEC with respect to transfer agent rules would be helpful to facilitate onchain tokenization efforts.

I appreciate the diligent work of the Division of Trading and Markets in preparing these FAQs. Market participants that have additional questions on these and other issues raised by the FAQs should feel free to reach out to the Division of Trading and Markets.[1] The Crypto Task Force also welcomes inquiries and feedback on these FAQs through crypto@sec.gov.

[1] https://www.sec.gov/about/divisions-offices/division-trading-markets/contacting-division-trading-markets