The SEC has updated its FAQs regarding crypto assets, clarifying how broker-dealers such as Morgan Stanley and Goldman Sachs can meet custody and capital requirements for crypto asset securities, as well as discussing the implications for Bitcoin and Ethereum ETF activities.
This update is available in the Trading and Markets FAQ index as “Frequently Asked Questions Relating to Crypto Asset Activities and Distributed Ledger Technology (May 15, 2025) – UPDATED December 17, 2025.”
The information provides firms with a current reference to navigate custody design as it becomes critical for the distribution of tokenized securities and ETP market-making.
How the SEC’s Updated Custody Guidance Influences Broker Control of Crypto Assets
According to the revised FAQ, the staff clarifies that Rule 15c3-3(b) on “possession or control” does not pertain to non-security crypto held by broker-dealers, meaning such assets are not subject to the Customer Protection Rule concerning securities custody.
For crypto asset securities, the staff states that broker-dealers can establish “control” under Rule 15c3-3(c), even for non-certificated instruments, by utilizing qualifying control locations. This guidance shifts the emphasis away from relying solely on the special-purpose broker-dealer (SPBD) safe harbor as the main means of demonstrating control.
How the SEC’s Withdrawal Alters the Understanding of Control in Crypto Asset Custody
The SEC and FINRA’s 2019 joint statement regarding broker-dealer custody of digital asset securities has been withdrawn, focusing broker-dealers on the FAQ framework and its existing control-location concepts for crypto asset securities.
A key operational issue remains how to effectively meet the Rule 15c3-3(c) concept of “control” for blockchain-registered securities. The FAQ does not specify that broker-dealers must hold private keys, but emphasizes that control is connected to safeguarding customer securities at a recognized control location, such as a bank control site or multisignature setup.
Prospects for Bank Partnerships and Market Implications
The Federal Reserve’s recent withdrawal of earlier supervisory letters simplifies bank supervision regarding crypto-asset activities, which is significant for broker-dealers that rely on bank sub-custody as a control-location option.
Broker-dealers must still demonstrate compliance with 15c3-3(c) control, but there may be reduced procedural hurdles as banks engage more routinely with these activities.
Over the next year or so, the custody market could focus on establishing which structures provide consistent control evidence while mitigating cybersecurity risks.
