The U.S. Securities and Exchange Commission (SEC) issued a statement regarding broker-dealers holding crypto-asset securities.
PANews reported on December 18 that the U.S. Securities and Exchange Commission's (SEC) Department of Trading and Markets issued a statement regarding broker-dealers holding crypto-asset securities. The statement clarifies the applicability of Rule 15c3-3(b)(1) of the Securities Exchange Act to crypto-asset securities (i.e., "crypto-asset securities"), applying to broker-dealers holding such assets for clients. The statement indicates that the SEC will not object to a broker-dealer's determination that it has physical possession or control of crypto-asset securities in a client's account if the broker-dealer takes the following actions. Controls: 1. Access and Transfer Capabilities: Direct access to crypto asset securities and the ability to transfer such assets on the relevant distributed ledger; 2. Technical Risk Assessment: Establish and implement well-designed written policies and procedures to assess the characteristics and risks of the distributed ledger technology and related networks that record asset ownership; 3. Risk Mitigation: If it is known that there are significant security or operational problems or weaknesses in the relevant distributed ledger technology, or that holding such assets would pose other significant risks to its business, it shall not assume ownership of such assets; 4. Private Key Protection: Establish policies, procedures, and internal controls that conform to industry best practices to prevent the theft, loss, or unauthorized use of private keys required for accessing and transferring assets, and ensure that no one other than the broker-dealer (including clients or third parties) can access private keys or transfer assets; 5. Contingency Plan: Develop well-designed written policies, procedures, and arrangements to ensure that crypto asset securities are securely preserved and transferable in the event of blockchain failures, 51% attacks, hard forks, or in the event of liquidation or bankruptcy of the broker-dealer.
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