On December 17, 2025, the U.S. SEC's Division of Trading and Markets issued a temporary statement regarding the custody of cryptocurrency securities. The core of the statement is to adaptively interpret the customer protection rule 15c3-3 of the Securities Exchange Act in the cryptocurrency field, resolving the adaptation challenge of the concept of 'physical possession' between digital assets and traditional rules. Below is a detailed interpretation of the core content of the statement, applicable conditions, and industry impact:
1. Core Content of the Statement and Background
1. Core Position: This statement is a temporary guideline, and the SEC has clearly stated that it is still assessing various macro issues related to the custody of cryptocurrency securities by broker-dealers. This announcement is in response to the demands of market participants to address their compliance concerns. After all, the digital nature of cryptocurrency securities is clearly disconnected from the traditional 'physical possession' requirements for tangible securities in customer protection rules, and the industry has long lacked clear compliance standards.
2. Rule integration: The statement focuses on Rule 15c3-3, which originally required brokerage firms to fully pay for and over-collateralize securities to achieve and maintain physical possession or control. This statement clarifies for the first time that 'physical possession' of crypto asset securities can be determined under specific conditions, building a bridge between traditional regulatory rules and blockchain assets.
II. Conditions for recognizing 'physical possession'
The SEC does not simply regard on-chain transfer capability as the sole determining standard but has established dual core conditions to ensure that the custody actions of brokerage firms are safe and controllable:
1. Basic operational capabilities: Brokerage firms must be able to directly obtain customers' crypto asset securities and have the ability to transfer such assets on the corresponding distributed ledger. This is a core prerequisite for meeting the operational aspect of 'possession,' as the circulation of crypto assets relies on on-chain operations, replacing the delivery actions of traditional physical securities.
2. Technology and process control: Reasonable written policies and procedures must be formulated and executed, and evaluations of the distributed ledger technology and its associated networks where the crypto asset securities reside must be conducted and recorded in advance, with regular reviews and evaluations to follow. The evaluation content includes ledger technology characteristics, network governance mechanisms, as well as protocol updates and implementation methods, to identify potential vulnerabilities at the technical level.
III. Key constraints of risk denial clauses
The clause in the statement that 'if there are significant security or custody risks, possession cannot be recognized' serves as an important bottom line for risk prevention. This means that even if brokerage firms meet the above two conditions, if there are risk vulnerabilities in actual operations, they still cannot obtain 'physical possession' recognition. For example, if the distributed ledger has obvious security vulnerabilities that can be exploited by hackers, the custody process lacks risk hedging mechanisms, or customer assets are mixed with their own assets, these situations will all be judged as non-compliant. This clause effectively forces brokerage firms to strengthen their risk control systems to avoid customer asset losses due to the high-risk nature of crypto assets.
IV. Profound impact on the industry
1. Reducing compliance uncertainty: Previously, traditional financial institutions were cautious about conducting crypto asset securities custody businesses due to concerns about non-compliance with regulatory requirements such as 'physical possession.' Now, clear recognition standards provide brokerage firms with a clear compliance direction, reducing the legal and regulatory risks they face due to ambiguous rules.
2. Promoting institutional entry: Clear regulatory guidelines will attract more traditional brokerage firms to venture into the field of crypto asset securities custody. The participation of such institutions will provide more reliable custody channels for institutional investors to enter the crypto market, further promoting the institutional investment process of crypto asset securities.
3. Strengthening risk prevention awareness: Risk denial clauses will promote the formation of a consensus in the industry on 'compliance and risk control running in parallel.' Brokerage firms not only need to meet operational conditions but also need to continuously invest resources to improve security technology and optimize custody processes to avoid losing business qualifications due to risk issues. This helps to overall reduce the industry risk in the field of crypto asset securities custody.
The digital assets targeted by this statement are not commodity-type cryptocurrencies like BTC or ETH, but specifically refer to crypto asset securities, such as tokenized stocks and bonds, which belong to this category. This can be further clarified from the following two aspects:
1. Core focus on tokenized traditional securities: SEC official Hester Peirce mentioned in related statements that the custody statement covers tokenized equity or debt securities. These types of assets essentially transform stocks, bonds, etc., which are subject to securities regulations in traditional financial markets, into crypto token forms through blockchain technology. Their core attributes still belong to securities, only the carrier has changed to crypto assets, which is also one of the core targets of regulatory statements. For example, if a company transforms its issued common stock into corresponding crypto tokens for trading on the blockchain, these tokens would fall under the category of crypto asset securities in this statement.
2. Covering native crypto tokens that meet securities attributes: In addition to tokenized traditional securities, the statement also applies to native crypto tokens that have been recognized as securities by the SEC through the Howey test. These tokens do not have corresponding traditional securities as their underlying assets but are defined as securities crypto assets from the beginning due to characteristics such as centralized issuance bodies and investors relying on that body for returns. For example, some tokens issued during the ICO stage, if they meet the condition of 'investing in a common enterprise and expecting to profit solely from the efforts of the issuer,' belong to crypto asset securities and must also comply with the custody rules in this statement.
Here are some examples of crypto asset securities:
I. Tokenized traditional securities
1. Tokenized bonds issued by Goldman Sachs for the European Investment Bank: In November 2022, Goldman Sachs issued a two-year digital bond worth 100 million euros for the European Investment Bank through its digital asset platform GSDAP. This bond was issued and settled on a private blockchain, traditionally requiring five days for bond settlements, while this tokenized bond settlement takes less than 60 seconds and has also been included in the official securities list of the Luxembourg Stock Exchange, making it a highly compliant crypto asset security.
2. On-chain commercial paper issued by JPMorgan: In December 2025, JPMorgan issued a U.S. commercial paper for Galaxy Digital Holdings on the Solana blockchain. JPMorgan created on-chain U.S. commercial paper tokens, with issuance and redemption payments made in the stablecoin USDC. Coinbase and Franklin Templeton participated in this subscription, and this type of tokenized short-term debt instrument is considered a crypto asset security.
3. Franklin Templeton's on-chain U.S. government money market fund: This fund, code-named FOBXX, manages assets exceeding $760 million, transforming shares of the U.S. government money market fund into crypto token forms. Investors can directly trade these tokenized shares without going through brokers, breaking the intermediary dependence of traditional fund transactions, while also possessing the investment attributes of securities and the circulation characteristics of crypto assets, thus belonging to crypto asset securities.
II. Native crypto token category (recognized as meeting securities attributes)
1. Telegram's Gram token: This token is the native token of the Telegram blockchain project. After the SEC lawsuit, the court determined that it meets all the characteristics of the Howey test. Because the issuance and value of the Gram token highly depend on the operational efforts of the Telegram team, early investors were also hinted at obtaining high profits, and the token's utility could not match its sale price, it was ultimately ruled as an unregistered security, belonging to a typical native crypto asset security. The project also ended without success due to related litigation.
2. $HAWK token: This is a meme coin project token launched based on the influence of internet celebrity Hailey Welch. The project team leveraged Welch's social media influence for extensive promotion, claiming that the token is not just a speculative asset but will ignite a cultural movement with enormous growth potential. Investor profits entirely depend on Welch and her team's operational management, meeting the core characteristics of securities in the Howey test, and were sued by investors for being unregistered securities, falling within the category of crypto asset securities.
In addition, tokenized government bonds issued by countries such as Slovenia and the Philippines, as well as tokenized stocks of companies like Apple and Tesla supported by Trust wallet, are all considered crypto asset securities. They transform traditional securities into the form of crypto tokens, or are crypto assets that inherently possess securities attributes.
