SEC Issues Advisory for Broker-Dealers on Token Key Management and Blockchain Risks

The SEC’s crypto task force, led by Commissioner Hester Peirce, offers informal guidance for brokers on custody of client crypto assets and addresses oversight of alternative trading systems.

87d ago

Summary

The U.S. Securities and Exchange Commission, via its Division of Trading and Markets, issued a new statement guiding broker-dealers in handling custody of client crypto securities, including safeguarding private keys and preparing for events like blockchain malfunctions, 51% attacks, hard forks, and airdrops. The informal standards aim to give brokers confidence in managing assets without regulatory enforcement action, and extend to tokenized stocks and debt securities. The SEC also released a FAQ document on crypto alternative trading systems (ATS), focusing on trading and settlement practices. Commissioner Hester Peirce emphasized the need for clear market structure rules to facilitate fair and orderly markets without imposing unnecessary burdens.

Terms & Concepts

Private keys: Cryptographic codes granting access to cryptocurrency holdings; they must be securely stored to prevent unauthorized use.
51% attack: A scenario where a single entity gains majority control of a blockchain’s mining power, potentially allowing it to alter the ledger and disrupt transactions.
Alternative Trading Systems (ATS): Non-exchange trading venues that match buyers and sellers of securities, including certain platforms dealing in digital assets.