CUSTODY OF DIGITAL ASSET SECURITIES: A Proposal to Address Open Questions for Broker-Dealers Under the SEC’s Customer Protection Rule

U.S. Securities and Exchange Commission (“SEC”) staff has recognized that blockchains, or distributed ledger technology, could be used to issue and transfer ownership of “Digital Assets” that are securities (“Digital Asset Securities”), depending on the facts and circumstances. The goal of this Q&A is to propose answers to the Division of Trading and Markets’ frequently asked questions of interpretation with respect to how broker-dealers may comply with the possession or control requirements of the Customer Protection Rule when carrying fully-paid Digital Asset Securities for the account of customers.