SEC issues regulatory guidelines for cryptocurrencies: latest compliance requirements for brokers, trading pairs, and DLT applications

【Chain Wen】The U.S. Securities and Exchange Commission (SEC) Division of Trading and Markets recently published a Frequently Asked Questions document regarding crypto assets and distributed ledger technology, clarifying several key compliance issues for market participants.

Where are the boundaries of broker responsibilities?
Non-securities crypto assets are not subject to Rule 15c3-3 of the Securities Exchange Act. However, once “crypto asset securities” are involved, brokers can establish a “control” mechanism under this rule to meet compliance requirements. The SEC states that it does not oppose storing assets in non-paper formats.

How are client assets protected?
The scope of SIPC (Securities Investor Protection Corporation) protection is limited—if crypto assets are not registered under the Securities Act, they do not qualify for SIPC protection. What is the solution? The SEC recommends treating non-securities crypto assets as “financial assets” under UCC Article 8 and managing them within “securities accounts,” which better safeguards client assets in case of liquidation or bankruptcy.

What can exchanges do?
National securities exchanges and alternative trading systems (ATS) can now offer “crypto securities/non-securities asset” pairing trading services, provided they are legal and compliant, with clear disclosure of trading information in Form ATS or ATS-N.

Regarding blockchain ledger applications
Transfer agents handling securities transfers for crypto asset issuers, where the assets are registered securities under Section 12, need to register with the SEC. Using blockchain as the main ledger is acceptable as long as all federal recordkeeping and regulatory requirements are met.

How are clearing and ETPs handled?
Registered broker-dealers operating alternative trading systems can directly clear client transactions within their own accounts and books. The SEC does not require registration as a dedicated clearing agency. For crypto asset tracking products (ETPs), the SEC states it does not oppose handling them in the same manner as commodity ETPs established in 2006.