SEC Issues Crypto Custody Guidance for Tokenized Securities

This week, the Securities and Exchange Commission released a staff statement designed to add transparency to digital asset custody. Issued by the SEC’s Division of Trading and Markets, the statement outlines how broker-dealers can treat certain on-chain securities—such as tokenized stocks and bonds—within existing custody frameworks under Rule 15c3-3.

Importantly, the SEC staff is explicit that this is not a Commission rule. The statement notes it “has no legal force or effect” and “creates no new or additional obligations” for market participants, but it does provide a clearer picture of how staff views custody practices for these assets.

This guidance follows related commentary from SEC Commissioner Hester Peirce, who welcomed the added clarity and urged the agency to move quickly toward longer-term solutions. In her words, the staff statement “provides clarity about the Division’s views to broker-dealers seeking to provide custody services to their customers.”

Why SEC Crypto Custody Guidance Matters

This guidance marks a notable milestone for the growing RWA (Real World Asset) tokenization sector. It provides clearer expectations for how market intermediaries can use tokenization strategies and tokenized assets without falling out of compliance—especially around custody, key management, and transfer controls.

Source: SEC.gov

The guidance applies specifically to “crypto asset securities”—in plain terms, crypto assets that are securities. The Trading and Markets statement defines these to include “tokenized versions of an equity or debt security.” In other words, these are on-chain representations of traditional securities (like shares or bonds), rather than non-security crypto assets.

Why the SEC Calls This Crypto Custody Guidance “Interim”

The SEC staff frames the statement as an interim step. Specifically, Trading and Markets explains that it is responding to market participant requests while the Commission continues to consider broader custody questions and review feedback.

For readers, that matters: this is best understood as a directional roadmap for broker-dealers and tokenization platforms—not the final word on how custody and transfer rules will evolve.

Broker-Dealer Requirements

The broker-dealer guidance is widely viewed as a practical road map for the industry. Early in the statement, the SEC staff clarifies that it applies to broker-dealers that carry crypto asset securities for customers, including firms that also operate traditional securities businesses.

Crucially, it treats tokenized securities as securities first. Rather than creating a new asset class, the statement anchors custody expectations in the Customer Protection Rule (Rule 15c3-3), focusing on how “physical possession” can be satisfied for crypto asset securities in specific circumstances.

Custody Requirements

At a high level, the SEC staff’s approach emphasizes: (1) a broker-dealer’s ability to access and transfer the asset on the relevant distributed ledger technology, (2) ongoing due diligence on the chain and its governance, and (3) robust key protection and operational resilience.

Unlike traditional securities custody, on-chain custody introduces a technical reality: private keys are the mechanism that enables access and transfer. Reflecting that, the statement emphasizes that broker-dealers should have controls designed to protect against theft, loss, or unauthorized use of keys—and to ensure no other person can transfer the asset without broker-dealer authorization.

Practical implication: for broker-dealer custody models, the guidance strongly favors a structure where the broker-dealer maintains the technical ability to prevent unauthorized transfers and maintain custody protections consistent with Rule 15c3-3’s intent.

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“Physical Possession” and Private Key Control Explained

Traditional securities custody concepts don’t map perfectly onto blockchain-based assets, but the SEC staff tries to bridge the gap using the “physical possession” clause of Rule 15c3-3(b)(1). In the circumstances described, Trading and Markets says it will not object to a broker-dealer deeming itself to have “physical possession” of a crypto asset security if it takes certain measures.

Those measures include maintaining written policies and controls consistent with best practices to protect private keys, and ensuring that no other person—including the customer—has access to the keys and the ability to transfer the asset without broker authorization.

Accessibility

Another critical focus of the guidance is accessibility—particularly in stress scenarios. The staff statement emphasizes that broker-dealers should have written policies, procedures, and arrangements that address disruptions and ensure continued safekeeping and accessibility even if the firm is wound down or liquidated.

This is important for institutional investors: it pushes tokenized security custody closer to traditional expectations around continuity, recoverability, and customer protection—while acknowledging that blockchain assets behave more like live software systems than static book-entry records.

Vet Blockchains and Projects

Under the SEC staff’s framework, broker-dealers are expected to conduct and document an assessment of the distributed ledger technology and associated network before undertaking to maintain possession, and at reasonable intervals thereafter.

That assessment includes governance considerations (how protocol updates are determined and implemented) and operational resilience factors. In practice, this moves “chain due diligence” from a nice-to-have into a compliance-relevant operational requirement for any broker-dealer offering custody of tokenized securities.

Prevent Unauthorized Transfers

A core theme in the guidance is that transfers of tokenized securities must still align with regulated transfer expectations. The statement emphasizes broker-dealer controls designed to prevent unauthorized or accidental use of keys and to ensure transfers cannot occur without broker authorization.

For market structure, the takeaway is clear: tokenized securities may become more common, but broker-dealers that custody them are expected to maintain a transfer-approval framework analogous to traditional securities processes—even if the underlying rails are blockchain-based.

Lawful Orders and Transfer Restrictions

The staff statement also addresses scenarios involving lawful orders, including the need to support steps related to “seizing, freezing, burning or prevention of transfer” of crypto asset securities when required.

While controversial among some crypto-native participants, this is consistent with how securities custody has historically interfaced with court orders and regulatory mandates—and it signals that tokenized securities infrastructure will be expected to support similar enforcement and restriction mechanisms.

Where Crypto Technology Conflicts With SEC Custody Rules

This guidance is broadly seen as a step in the right direction, but it also highlights persistent friction between programmable assets and legacy compliance frameworks.

Commissioner Hester Peirce has repeatedly argued that tokenization should not be treated as a loophole—but also that rules should evolve to reflect technical realities. In her Dec. 17, 2025 statement, she applauded the clarity provided and encouraged the Division to move quickly toward Commission-level consideration of amendments to Rule 15c3-3 that directly address crypto custody.

Open questions remain, especially around how tokenized securities interact with non-security crypto assets in trading environments and whether (or how) certain forms of compliant on-chain transfer restrictions could be embedded at the protocol or smart contract layer.

Why Tokenized Stocks Are Moving On-Chain

It is increasingly clear that tokenization is gaining traction because it can reduce operational friction, improve transparency, and enable new forms of asset portability and programmability. As a result, demand is growing to integrate tokenized assets into traditional market structures—without sacrificing core investor protections.

The SEC staff’s approach suggests a willingness to accommodate tokenized securities within existing rules, provided broker-dealers implement robust operational controls, chain diligence, and private key protections.

Securitize Takes Tokenization to the Next Level

One company pushing the sector forward is Securitize, which has announced plans to launch a compliant tokenized securities venue in Q1 2026.

Unlike earlier tokenized “stock” products that primarily provided synthetic exposure, Securitize’s framework allows tokens to represent direct equity interests under existing regulatory exemptions and approvals. This structure enables voting rights, dividends, and other shareholder benefits, marking a maturing of the market from synthetic experiments to true digital equity.

Tokenization – the Next Frontier

Tokenization of RWAs (Real World Assets) continues to grow, with some analysts projecting the market could expand dramatically by 2030. The SEC’s latest custody guidance aligns with that broader trend, as more market participants seek to tokenize everything from fund interests to equities.

While the final regulatory posture is still evolving, the trajectory is clear: tokenized securities are moving from experimental pilots toward more standardized infrastructure—especially as custody, transfer controls, and operational resilience expectations become more defined.

Conclusion

The SEC’s Trading and Markets staff statement sheds light on how broker-dealers can custody crypto asset securities in a way that aligns with Rule 15c3-3’s customer protection intent. It signals a more constructive posture than earlier eras of regulatory uncertainty, while still prioritizing key custody controls, transfer authorization, and continuity planning.

Now, market participants will be watching for what comes next: whether the Commission moves beyond staff statements into formal rulemaking or amendments that more directly address tokenized securities custody—and how those rules might accommodate the programmable nature of on-chain assets without undermining investor protections.

What do you think about the SEC’s custody guidance? Does it stifle innovation or provide a stable framework for growth? Like, share, and let us know in the comments, and be sure to click here for more financial insight.