It’s brokers’ turn to clarify crypto in the series of staff statements from the U.S. Securities and Exchange Commission intended to reveal its current thinking on how to deal with the digital asset space, in this case addressing “physical possession” of assets by brokers and separately asking some questions about so-called alternative trading systems (ATS) for crypto.
One of the final two posts this week addresses the custody of clients’ crypto securities at regulated broker-dealers, advising firms on how to properly own these assets, including protecting clients’ private keys. As long as they follow the informal standards set forth in the statement, brokers will not receive a knock on their door from the SEC.
Their approach must also anticipate “blockchain malfunctions, 51% attacks, hard forks or airdrops,” according to the press release from the SEC’s Division of Trading and Markets.
The agency’s advice could help traditional trading companies find more comfort in their management of crypto assets. This would include tokenized stocks and debt securities, although the specific definition of a crypto security has not yet been fully established.
The SEC’s series of crypto statements have been welcomed with open arms by the industry, but they lack the regulatory or guiding authority, so they would be easy to overturn if the agency’s leadership changed hands.
Also this week, the U.S. securities regulator released a “frequently asked questions” document examining crypto ATS activity. As Commissioner Hester Peirce, who leads the agency’s crypto task force, pointed out, the questions largely focus on trade and settlement.
“Trading platforms and market participants must be able to operate within clear market structure rules that facilitate fair and orderly markets without imposing unnecessary burdens,” Peirce said in a statement.
Read more: US SEC chief Atkins says clarity will come on crypto tied to investment contracts
