Regulatory Update: SEC and FINRA Withdraw 2019 Guidance on Broker-Dealer Custody of Digital Assets
May 16, 2025
The 2019 Joint Staff Statement was issued to address the application of federal securities laws to the custody of digital assets by broker-dealers. It underscored the need for broker-dealers to consider how to comply with the SEC's Customer Protection Rule when dealing with digital assets. The statement also highlighted the unique risks associated with digital assets, such as the potential for fraud, theft, and loss of private keys.
The SEC and FINRA withdrew the 2019 Joint Staff Statement; the withdrawal was announced jointly by the SEC's Division of Trading and Markets and FINRA's Office of General Counsel, indicating a coordinated decision by both regulatory bodies to rescind the prior guidance.
The withdrawal directly impacts:
The withdrawal of the 2019 Joint Staff Statement marks a shift in the SEC and FINRA’s approach to digital asset regulation. The guidance is no longer considered official and should not be relied upon by broker-dealers in assessing compliance with the Customer Protection Rule (Rule 15c3-3) or other applicable regulations. The statement’s rescission suggests regulators may pursue a shift in regulation that reflects the broader regulatory posture of the current federal administration.
As of May 15, 2025, this guidance has been officially withdrawn, effective immediately.
The joint withdrawal by the SEC and FINRA is a notable development that appears to represent a strategic step toward re-examining the regulatory framework for broker-dealer custody of digital asset securities, and perhaps regulation generally. Under the leadership of SEC Chair Paul Atkins, this move aligns with the broader Trump administration initiative to reduce regulation across multiple sectors. Regulators may be signaling an intent to develop an approach based in alignment with current market dynamics. The action suggests that new rulemaking or interpretive guidance could follow, reinforcing the need for firms to monitor developments closely as oversight of digital assets continues to evolve.
Broker-Dealers: The withdrawal removes the previous guidance that may have deterred BDs from engaging in digital asset custody due to compliance uncertainties. This could encourage more BDs to explore custody services for digital assets, provided they adhere to existing regulatory requirements.
Registered Investment Advisers: While the withdrawal directly pertains to BDs, it signals a broader regulatory shift that may influence how RIAs approach digital asset custody, or the asset class in general. RIAs should stay informed about potential changes to the Custody Rule and other relevant regulations that could affect their operations.
The SEC's withdrawal of the 2019 guidance marks a significant development in the regulatory landscape for digital assets. This action may pave the way for increased participation by broker-dealers in the digital asset custody space and signals a possible deregulatory environment for innovation in this sector.
CRC is closely monitoring these developments, including the FAQ's released alongside the joint recission, and will provide further insights and analysis as the regulatory framework for digital assets continues to evolve.
CRC keeps its thumb on the pulse of the evolving regulatory landscape. Keep an eye out for additional information, including updated guidance, risk alerts, and CRC’s thoughts on how to ensure successful compliance with evolving regulatory expectations within your firm’s existing regulatory compliance program.
Contact Mitch Avnet for further details: (646)346-2468 | mavnet@compliance-risk.com
