SEC: Broker-dealers holding security tokens won’t be subject to enforcement action for 5 years
United States Securities and Exchange Commission (SEC) today issued a statement and requested for comment on the issue of “custody of digital asset securities by broker-dealers.” The federal agency believed this would encourage innovation around the application of Securities Exchange Act Rule to digital asset securities.
According to the Commission, a broker-dealer operating under certain “circumstances” will not be subjected to enforcement action for a period of five years. Among others, the broker-dealer must have control of customer “fully paid and excess margin digital asset securities.”
Additionally, such circumstances include that the broker-dealer limits its business to digital asset securities. It requires that broker-dealers must establish and implement procedures to mitigate risks associated with conducting its business. SEC stated that broker-dealers must also make their customers aware about trading risks.
Further, SEC asked for comments on allowing investors to use BTC and ETH to pay for security tokens:
Should this position be expanded to include the use of non-security digital assets as a means of payment for digital asset securities?
Recently, congress members asked the federal agency to verify rules as to which broker-dealers can custody digital securities. In a letter which also addressed FINRA the officials wrote:
In the absence of guidance from the SEC, FINRA has not outright denied any broker-dealer applications that involve the custody of digital securities, which would render the applications eligible for appeal. Rather, FINRA has allowed the applications to languish—often for years—or asked the applicants to withdraw such applications.