On December 17, 2025, the SEC’s Division of Trading and Markets released a staff statement clarifying that broker-dealers must maintain exclusive control of private keys when holding crypto asset securities for customers.

This marks a significant shift from years of regulatory uncertainty that left many traditional financial institutions unable to offer crypto custody services. The guidance provides clear rules for firms wanting to hold tokenized stocks, bonds, and other digital securities on behalf of clients.

What the New Rules Require

The SEC’s statement focuses on how broker-dealers can meet the requirements of Rule 15c3-3, also known as the Customer Protection Rule. This long-standing regulation requires broker-dealers to maintain “physical possession or control” of customer securities.

For crypto asset securities, the SEC now says firms can demonstrate possession by controlling the private keys that authorize transactions on blockchain networks. The key requirement is exclusive control—no customers, affiliates, or third parties can access these private keys or transfer assets without the broker-dealer’s explicit approval.

Source: @SECGov

Broker-dealers must establish written policies that follow industry best practices to protect private keys from theft, loss, or unauthorized use. These policies must prevent anyone else from moving customer assets without the firm’s authorization.

Blockchain Assessment and Security Standards

Before taking custody of any crypto asset security, broker-dealers must conduct thorough assessments of the underlying blockchain network. These assessments must examine multiple factors including performance, transaction speed, security features, and the network’s ability to handle attacks.

Firms must evaluate how protocol updates and governance changes are implemented on each blockchain network. This assessment process must be repeated at regular intervals to catch any emerging security issues.

If a broker-dealer becomes aware of material security problems or operational weaknesses in a blockchain network, it cannot claim possession of assets on that network. The SEC wants firms to avoid taking custody of crypto asset securities that pose significant risks to their business operations.

Planning for Disruptions and Legal Compliance

The new guidance requires broker-dealers to prepare detailed plans for various disruption scenarios. These plans must address blockchain malfunctions, network attacks known as 51% attacks, hard forks where blockchain networks split, and airdrops where new tokens are distributed to holders.

Firms must also maintain procedures that allow them to comply with lawful court orders. This includes the ability to freeze, seize, or burn crypto asset securities when required by law enforcement or judicial authorities.

Additionally, broker-dealers need plans for what happens if they can no longer operate as a business. The guidance requires firms to ensure that crypto asset securities remain accessible and can be transferred to another broker-dealer, trustee, or appropriate party during bankruptcy or liquidation proceedings.

What Assets Are Covered

The SEC’s guidance specifically applies to “crypto asset securities,” which include tokenized versions of traditional equity and debt securities. These are stocks, bonds, and similar instruments that exist on blockchain networks rather than in paper form.

The rules do not apply to cryptocurrencies that are not classified as securities. For example, Bitcoin and Ethereum held as commodities fall outside this guidance. According to the SEC’s FAQ document, paragraph (b) of Rule 15c3-3 only applies to securities, not other types of crypto assets.

Industry Impact and Traditional Finance

This guidance opens the door for major Wall Street firms like Morgan Stanley, Goldman Sachs, and other traditional broker-dealers to offer crypto custody services. Previously, many large financial institutions avoided crypto custody because regulatory requirements were unclear or seemed impossible to meet.

Between 2022 and early 2025, regulatory barriers discouraged traditional firms from entering the crypto space. The SEC previously limited crypto custody largely to special-purpose broker-dealers that could not operate traditional securities businesses, creating operational complexity and regulatory uncertainty that kept major financial institutions away from the sector.

The new statement moves away from the special-purpose broker-dealer model. It allows traditional broker-dealers to integrate crypto custody into their existing operations without creating separate entities. However, firms must now meet higher operational standards including cold storage arrangements, multi-factor key management, real-time reconciliation, and tested disaster recovery plans.

Regulatory Response and Future Changes

SEC Commissioner Hester M. Peirce welcomed the guidance in a separate statement. She praised the Division of Trading and Markets for providing clarity to broker-dealers seeking to offer custody services. However, she encouraged the Division to develop recommendations for formal amendments to Rule 15c3-3 that specifically address crypto assets.

The statement notes this guidance is an interim step while the Commission continues to consider broader issues related to broker-dealer custody of crypto asset securities. The SEC’s Crypto Task Force has been working to provide regulatory clarity across multiple areas of the digital asset industry.

The guidance comes alongside other significant regulatory developments. In September 2025, the SEC’s Division of Investment Management issued a no-action letter allowing state trust companies to serve as qualified custodians for digital assets. In December 2025, the Office of the Comptroller of the Currency granted conditional approval for five digital asset firms to obtain national trust bank charters.

The Path Forward for Crypto Custody

Broker-dealers now have a defined roadmap for compliance, though implementing these requirements will require substantial operational investments. Firms must build infrastructure to manage private keys securely, conduct regular blockchain assessments, and maintain comprehensive policies for various disruption scenarios.

For investors, this guidance brings crypto asset securities closer to the protections that govern traditional stocks and bonds. Clients who hold tokenized securities through registered broker-dealers should receive clearer disclosures about asset custody and what happens if their broker faces financial difficulties.

The regulatory framework is still evolving, and the SEC has indicated that formal rule amendments may be forthcoming. However, this statement provides the immediate clarity that market participants have requested for years, potentially unlocking significant institutional participation in tokenized securities markets.