U.S. SEC aids brokers on crypto custody, looks more closely at ATS activity

Core Viewpoint - The U.S. Securities and Exchange Commission (SEC) is providing clarity on the treatment of digital assets, particularly focusing on brokers' custody of crypto securities and alternative trading systems (ATSs) for crypto [1][4]. Group 1: Broker-Dealers and Custody - The SEC's recent guidance addresses how regulated broker-dealers should properly possess customers' crypto securities, emphasizing the importance of protecting customers' private keys [2]. - Broker-dealers that adhere to the informal standards outlined by the SEC will not face enforcement actions from the agency [2]. Group 2: Security and Risk Management - The SEC's guidance includes considerations for potential risks such as blockchain malfunctions, 51% attacks, hard forks, and airdrops, which broker-dealers must anticipate in their operations [3]. - The advice aims to provide traditional trading firms with greater confidence in managing crypto assets, including tokenized stocks and debt securities, although a precise definition of crypto securities remains undefined [3]. Group 3: Industry Reception and Future Implications - The SEC's series of statements has been positively received by the industry, but they lack the authority of formal rulemaking, making them susceptible to reversal with changes in agency leadership [4]. - The SEC also released a "frequently asked questions" document regarding crypto ATS activities, focusing on trading and settlement processes [4][5].