On December 23, 2020, the Securities and Exchange Commission issued a statement and request for comment relating to custody of digital asset securities by broker-dealers, including certain conditional, time-limited relief for such arrangements. The statement will become effective 60 days after its publication in the Federal Register.

Most significantly, the SEC’s statement indicates that, for a five-year period, a broker-dealer will not be subject to an SEC enforcement action on the basis that the broker-dealer has deemed itself to have obtained and maintained physical possession or control of customer fully paid and excess margin digital asset securities for the purposes of paragraph (b)(1) of SEC Rule 15c3-3 (the Customer Protection Rule), which requires such possession or control, provided that the broker-dealer operates in compliance with the circumstances outlined in the SEC’s statement. Among other things, those circumstances require that the broker-dealer must limit its business to digital asset securities, implement policies and procedures reasonably designed to mitigate risks associated with its digital asset securities business, and provide customers with certain disclosures regarding risks of digital asset securities transactions.

The SEC also requested comment on a list of specific questions with respect to industry standards and best practices regarding custody of digital asset securities. Comments may be submitted electronically or in paper form.

The full statement and request for comment is available here.