SEC says broker-dealers need to maintain crypto private keys to comply with customer protection rules

The U.S. Securities and Exchange Commission (SEC) issued guidance for broker-dealers regarding the custody of "crypto asset securities," which it defines to include tokenized equity or debt securities. To comply with the customer protection rule requiring "physical possession or control" of customer assets, the guidance stipulates that a broker-dealer must maintain exclusive access to the private keys needed to transfer the token on a blockchain. Furthermore, brokers must establish written policies to protect these private keys from theft or unauthorized use. The guidance also requires firms to have plans for addressing potential disruptions like blockchain malfunctions or network attacks, and the ability to comply with legal orders concerning asset seizure or freezing. Broker-dealers cannot claim possession if they are aware of material security or operational weaknesses with the underlying distributed ledger technology.

(Source：The Block)