The regulators attempt to clarify their position on the possible custody of digital assets by broker-dealers, but questions remain.

By Stephen P. Wink, Cameron R. Kates, Shaun Musuka, and Deric Behar

The SEC and FINRA recently released a joint staff statement (Joint Statement) addressing the custody of digital asset securities by broker-dealers. For some time, registered broker-dealers and applicants have sought to facilitate digital asset transactions and the accompanying custody of such assets. However, their efforts have been stymied, in part due to a lack of interpretive guidance from the SEC and FINRA regarding how to custody digital assets in compliance with the relevant regulations. The Joint Statement is an initial step by the SEC and FINRA toward clarifying their positions on these issues. It makes clear that broker-dealers that do not seek to custody such assets but seek to otherwise engage in brokerage activities with digital assets (e.g., private placements or if the broker-dealer matches buyers and sellers who conduct settlement between themselves) should be permitted to do so. The bottom line, however, is that the regulators “are just not ready”^[i] to approve broker-dealers to custody digital assets.