On July 8, 2019 the U.S. Securities and Exchange Commission (the “SEC”) and the Financial Industry Regulatory Authority (“FINRA”) (both, the “Regulators”) published a Public Statement titled, “Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities” (the “Joint Statement”).  The Joint Statement follows many months of discussions with certain digital asset securities industry participants seeking registration with the SEC as broker-dealers.

The Joint Statement noted the Regulators’ discussions with these industry participants have contributed to the Regulators’ ever-evolving understanding of how certain federal securities laws and FINRA rules may affect or be applicable to those industry participants.  Many of these discussions were focused on finding a custody solution for digital asset securities that would meet the possession or control standards prescribed in the SEC’s Customer Protection Rule.  As a result, the Joint Statement explored the importance and potential applicability of the Customer Protection Rule to industry participants.