The Securities and Exchange Commission (SEC) has taken a significant step towards exploring the regulatory considerations surrounding the custody of crypto assets through broker-dealers and other financial institutions. On March 25, 2025, the SEC held a Crypto Task Force roundtable to discuss the challenges of taking custody of crypto assets in an uncertain regulatory environment.
Panel on Custody Through Broker-Dealers and Beyond
The roundtable discussion focused on the challenges of taking custody of crypto assets for customers in an uncertain regulatory environment. The panelists considered whether changes to the custody rules under the Securities Exchange Act of 1934, Investment Advisers Act of 1940, and the Investment Company Act of 1940 are required, whether the “special purpose broker-dealer” regime is workable for market participants, and whether a new crypto asset broker-dealer framework is needed.
- Panelists emphasized that clear definitions of “custody” and “custodian” are needed in order to build rules around such activities and institutions.
- Panelists highlighted that, once it is determined which entities are custodians and what holding crypto assets entails, regulators should focus on the infrastructure, security protocols and expertise required to protect such assets.
- Panelists discussed recent security failures and debated the root cause of such failures to further inform regulatory requirements for crypto asset custodians and broker-dealers.
Panel on Investment Adviser and Investment Company Custody
A discussion concerning the custody of crypto assets in respect of investment advisers and investment companies highlighted problems with fitting a peer-to-peer payment system (crypto assets) into a system for centralized trading (traditional securities). Panelists discussed risks, including the need for clear definitions of control and ownership in respect of crypto assets, risks which arise during trading and how to address custodian insolvency concerns.
- Panelists discussed the current prudential regime for bank solvency as a possible source of regulatory guidance.
- Panelists considered whether restricting custodians and broker-dealers from proprietary trading or else forming separate affiliate entities to perform trading functions would enhance consumer protection.
- Panelists concluded that taking custody of these assets should not be limited to federally regulated banks, which would limit consumer choice.
Non-U.S. Regulatory Regimes
Non-U.S. regulatory regimes were discussed to determine if U.S. regulators could glean anything from foreign market regulators. The need for a comprehensive regime designed specifically for crypto assets was stressed by many panelists, and there was concern that continued piecemealing of new rules could lead to undesirable outcomes and cause the U.S. to fall behind in innovation.
| Regulatory Regime | Key Features |
|---|---|
| UK’s Financial Conduct Authority (FCA) | Focus on risk management and consumer protection |
| Swiss Financial Market Supervisory Authority (FINMA) | Regulatory framework for digital assets |
Remarks and Future Roundtables
Remarks from this roundtable can be found here: Paul S. Atkins, Chairman Commentary; Commissioner Hester M. Peirce Commentary; Commissioner Caroline A. Crenshaw Commentary; Commissioner Mark T. Uyeda Commentary. The SEC Crypto Task Force is scheduled to hold two more roundtables in May and June to discuss tokenization and decentralized finance. Information about those events and online broadcasting can be found here: Crypto Task Force Roundtable – Tokenization: Moving Assets Onchain: Where TradFi and DeFi Meet; Crypto Task Force Roundtable – DeFi and the American Spirit.
As the SEC continues to explore the regulatory landscape of crypto assets, it is clear that a comprehensive framework is needed to protect consumers and facilitate innovation. The roundtable discussion highlighted the need for clear definitions of custody and custodian, as well as the importance of infrastructure, security protocols, and expertise in protecting crypto assets.
“The SEC’s goal is to facilitate clear regulatory ‘rules of the road’ for digital assets through a ‘rational, fit-for-purpose regulatory framework.'”
— Paul S. Atkins, Chairman
With the SEC’s commitment to a comprehensive regime, it is likely that we will see significant developments in the regulatory landscape of crypto assets in the coming months and years. As the regulatory environment continues to evolve, it will be crucial for market participants, regulators, and consumers to stay informed and engaged in the discussion.
The SEC’s Crypto Task Force is well-positioned to lead the way in shaping the regulatory framework for crypto assets.
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