Davis Polk Discusses SEC No-Action Statement on Custody of Digital Asset Securities

A recent SEC conditional no-action position (the “No-Action Statement”) has further opened the regulatory door to trading of digital asset securities (“DAS”), by allowing certain limited purpose DAS-only broker-dealers to maintain custody of these securities on behalf of customers.  As firms have sought to develop trading systems for DAS, questions regarding whether or how broker-dealers could custody these securities for customers in compliance with SEC rules has been one of the primary regulatory hurdles.  Efforts to meet the SEC staff’s prior guidance that broker-dealers generally could not custody DAS for customers triggered somewhat cumbersome workaround attempts.  … Read more