The U.S. Securities and Exchange Commission has issued a new staff statement that sharply clarifies how broker-dealers must handle custody of crypto asset securities, marking a shift from years of regulatory ambiguity toward direct operational expectations.
In a statement released on Dec. 17, 2025, the SEC’s Division of Trading and Markets said broker-dealers that carry crypto asset securities for customers must maintain exclusive possession of those assets by controlling the private keys used to access and transfer them.
Firms that fail to meet this standard may not treat themselves as having custody under federal customer protection rules.
Holding Crypto Isn’t Enough—SEC Says Control Is What Counts
The statement focuses on paragraph (b)(1) of Rule 15c3-3, the long-standing customer protection rule that requires broker-dealers to maintain physical possession or control of fully paid and excess margin securities.
While the guidance does not introduce a new rule, it explains how the staff believes that requirement can be met when securities exist on a blockchain rather than in traditional form.
Under the SEC’s view, a broker-dealer can deem itself to have possession of a crypto asset security only if it has direct access to the asset on the relevant distributed ledger and the technical ability to transfer it.
That access must not be shared, as the staff emphasized that neither customers nor third parties, including affiliates, can hold private keys or otherwise move the asset without the broker-dealer’s authorization.
The guidance also requires broker-dealers to formally assess the blockchains and networks on which crypto asset securities operate before taking custody and to repeat those assessments at regular intervals.
Also, firms are expected to evaluate performance, security, governance, upgrade processes, and risks such as hard forks, 51% attacks, or protocol changes that could affect ownership records.
If a broker-dealer becomes aware of material security or operational weaknesses in a blockchain network, the staff said the firm should not treat itself as having possession of the asset.
The focus, according to the statement, is on risks tied directly to custody and transfer, rather than market or reputational concerns.
Crypto Custody Was Once Off-Limits; The SEC Now Says Otherwise
The statement arrives after several years in which broker-dealers argued that crypto custody was effectively impossible under SEC interpretations.
Between 2022 and 2024, the agency’s approach relied heavily on accounting and structural constraints that discouraged traditional firms from entering the space.
Firms under the SEC's jurisdiction will receive a notice first ahead of being hit with an enforcement action, Chair Paul Atkins says. #PaulAtkins #SECChairhttps://t.co/aWBXuDc2pW
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Staff Accounting Bulletin 121 required public companies holding customer crypto to record those assets as balance-sheet liabilities, making custody capital-intensive and, for many banks, commercially impractical.
At the same time, the SEC limited crypto custody largely to special-purpose broker-dealers that were barred from operating traditional securities businesses.
Large firms declined to pursue that model, citing operational complexity and regulatory uncertainty.
Industry lawyers often described the period as a regulatory dead zone in which compliance was required but rarely achievable.
The new statement attempts to resolve that standoff by tying compliance to concrete operational controls rather than abstract concerns about blockchain design.
The custody clarification follows another notable development at the SEC. On Dec. 13, the agency published a crypto wallet and custody investor bulletin outlining risks and best practices for self-custody and third-party custody.
The guide discussed rehypothecation, commingling of assets, and the trade-offs between hot and cold wallets, indicating a more educational posture toward crypto investors.
Together, the custody statement and investor guidance suggest a recalibration in how the SEC approaches crypto market infrastructure, with clearer expectations for firms and more explicit protections for customers.
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