The United States Securities and Exchange Commission (SEC) on Monday, released guidance on the broker-dealer custody of digital asset securities, per the report by Reuters.
The notice, in conjunction with the general counsel of the Financial Industry Regulatory Authority (FINRA), is issued as a response to the industry demand for clarity on whether the federal securities laws apply to such assets, including cryptocurrencies.
The statement notes that entities have to comply with relevant securities laws, especially the customer protection rule, in order to participate in the marketplace for digital asset securities.
The Customer Protection Rule aids in the improvement of assets whenever the broker-dealer fails. Per the SEC, it already has produced a nearly fifty-year track record of recovery for Investors.
“This record of protecting customer assets held in custody by broker-dealers stands in contrast to recent reports of cybertheft, and underscores the need to ensure broker-dealers robust protection of customer assets, including digital asset securities,” the SEC added.
Additionally, the statement is believed to open up more ways for traditional investors to hold digital asset securities.
The regulator noted that non-registered firms in the industry, seeking to expand its business to include digital asset securities services would have to register as a broker-dealer before conducting such services.
The broker-dealer advisor, Matt Comstock, said
SEC’s statement indicates it would view digital asset securities as uncertificated securities, similar to situations in some states where the ownership of a stock is evidenced by an electronic record as opposed to a physical certificate.
The SEC rule will enable the broker-dealers to establish custody through SEC-registered entities known as transfer agents, which maintains data of the securities’ record owners.
Also, the securities can be managed in a wallet controlled by the broker-dealer firms through private keys.
Meanwhile, the cryptocurrency exchange KuCoin announced a new feature that will enable its users to upkeep their crypto assets.
