New SEC rules lets Morgan Stanley, Goldman Sach legally “control” your private keys without the safety net you assume exists

The SEC updated its crypto asset FAQs, clarifying how broker-dealers like Morgan Stanley and Goldman Sachs can meet custody and capital requirements for crypto asset securities, effectively allowing them to establish "control" under Rule 15c3-3(c) even without holding private keys directly, provided they use qualifying control locations like HSMs or multisig arrangements where they have directive rights. This guidance withdraws prior statements, narrowing the focus to the FAQ framework and reducing reliance on the Special-Purpose Broker-Dealer (SPBD) safe harbor. Furthermore, proprietary Bitcoin and Ether positions held by broker-dealers facilitating in-kind ETF creations/redemptions may be treated as "readily marketable" for capital purposes, incurring a 20% commodity haircut. The shift emphasizes contract language, key governance, and audit trails to prove control, while non-security crypto remains outside the Customer Protection Rule's possession or control requirements.

(Source：CryptoSlate)