The SEC has refreshed its crypto asset FAQs, clarifying how broker-dealers like Morgan Stanley, Goldman Sachs, and others can fulfill custody and capital necessities for crypto asset securities, and addressing how the framework applies to Bitcoin and Ethereum ETF exercise.
The replace seems on the Buying and selling and Markets FAQ index as “Incessantly Requested Questions Regarding Crypto Asset Actions and Distributed Ledger Expertise (Could 15, 2025) – UPDATED December 17, 2025.”
It provides companies a present staff-posted reference as custody design turns into a gating merchandise for tokenized securities distribution and ETP market-making.
How the SEC’s up to date custody steering reshapes dealer management of crypto belongings
Within the FAQ textual content, employees reiterates that Rule 15c3-3(b) “possession or management” doesn’t apply to non-security crypto held by broker-dealers, retaining non-security crypto outdoors the Buyer Safety Rule mechanics that apply to securities custody.
For crypto asset securities, employees says a broker-dealer can set up “management” below Rule 15c3-3(c), even the place the instrument will not be certificated, through the use of qualifying management places.
Workers additionally says this strategy reduces reliance on the special-purpose broker-dealer (SPBD) protected harbor as the first route for demonstrating management over these securities.
The employees additionally says it will not object if broker-dealers facilitating in-kind creations and redemptions deal with proprietary positions in bitcoin or ether as “readily marketable” for web capital functions.
That may apply the 20% commodity haircut below Rule 15c3-1 Appendix B when calculating deductions.
These employees positions now sit alongside a proper cleanup of prior messaging.
How the SEC’s withdrawal reframes “management” in crypto asset custody
The 2019 SEC and FINRA joint employees assertion on broker-dealer custody of digital asset securities is marked withdrawn on the SEC withdrawal web page, with a parallel discover posted by FINRA.
The withdrawal narrows the broker-dealer custody “north star” to the FAQ framework and its acknowledged use of current control-location ideas for crypto asset securities.
Probably the most operationally delicate subject is what it takes, in observe, to fulfill the Rule 15c3-3(c) idea of “management” when securities are recorded on a blockchain.
The FAQ doesn’t say a broker-dealer should maintain personal keys, however 15c3-3(c) management is tied to safeguarding and directing the motion of buyer securities at a acknowledged management location.
For on-chain devices, that always maps to who can signal or compel signing by the custody stack.
Examples embody broker-dealer-held key materials in an HSM, a financial institution management location the place the broker-dealer has documented directive rights, or a multisignature association the place the broker-dealer’s signatory authority and procedures are designed to satisfy control-location expectations.
Legislation-firm summaries have emphasised that the employees’s strategy expands the trail for normal broker-dealers to proof management with out leaning on SPBD standing because the default posture.
That shift will increase concentrate on contract language, key governance, and the audit path that demonstrates management over time, based on Sullivan & Cromwell and Sidley Austin.
On ETP rails, the “readily marketable” posture for proprietary bitcoin and ether positions hyperlinks on to intraday stock economics for licensed members and market makers that help in-kind baskets.
A capital-efficiency sketch reveals the path: If an affiliated broker-dealer carries a median intraday stock of $50 million in BTC or ETH to facilitate creations and redemptions, a 20% commodity haircut implies a web capital deduction of about $10 million tied to that stock.
That arithmetic will not be a full web capital mannequin, but it surely explains why some desks desire money workflows and why employees remedy could make in-kind operations extra workable for companies working on skinny spreads.
Financial institution partnerships may additionally face fewer procedural tripwires than in prior cycles
The Federal Reserve withdrew earlier supervisory letters on April 24, 2025, that had set advance-notice expectations for sure crypto-asset and greenback token actions, shifting financial institution engagement towards extra routine supervisory channels.
For broker-dealers counting on financial institution sub-custody as a control-location pathway, that shift issues as a result of it could shorten the trail from idea to a supervisory dialog on the financial institution facet.
Dealer-dealers nonetheless must proof 15c3-3(c) management and data in a fashion examination groups can check.
Over the following 12–18 months, the custody market might cluster round which constructions produce repeatable proof of management whereas containing cyber and operational publicity.
In broad phrases, the choice is commonly whether or not the broker-dealer instantly controls key materials or proves directive management by a qualifying third-party management location.
Every choice trades off governance burden, incident-response design, and examiner consolation.
State of affairs (12–18 months)The place management sits (signing or directive authority)Main operational benefitMain execution riskBroker-dealer self-custodyBroker-dealer-controlled keys (HSM or multisig)Direct proof path for 15c3-3(c) controlCyber controls, insurance coverage limits, auditability at scaleBank sub-custody with broker-dealer directive rightsBank as management location, broker-dealer directs movementsFamiliar custody perimeter for incumbentsContract phrases and playbooks should show management in incidentsCrypto custodian tech with financial institution or belief wrapperSpecialist tooling, management framed through agreementsIntegration pace for tokenized safety workflowsControl-location qualification and supervision consistencySmart-contract escrow with transfer-agent co-signMultisig between broker-dealer and switch agentProgrammable controls for company actionsHow examination groups check “management” and recordkeeping over time
The Dec. 17 refresh additionally retains a line clear for retail-facing companies: Non-security crypto held at a broker-dealer stays outdoors Rule 15c3-3(b).
Corporations nonetheless want clear disclosures on which protections apply and which don’t.
Commissioner Hester Peirce has framed the employees FAQs as incremental, whereas pointing to how the steering can decrease friction for market members attempting to suit on-chain exercise into current rule units.
For compliance groups, the near-term tells are concrete: whether or not the SEC FAQ index receives additional edits.
One other key sign is whether or not FINRA interpretations evolve towards standardized examiner checklists for on-chain management proof and books and data.
