U.S. Representatives Urge SEC to Take Action on Custody of Digital Securities

On December 9, 2020, a bipartisan group of members of the U.S. House of Representatives, including Tom Emmer (R-MN-6), Warren Davidson (R-OH-8), Bill Foster (D-IL-11), David Schweikert (R-AZ-6), Darren Soto (D-FL-9), Ted Budd (R-NC-13), Dan Crenshaw (R-TX-2), Ralph Norman (R-SC-5) and Ro Khanna (D-CA-17), penned a letter addressed to U.S. Securities and Exchange Commission (“SEC”) Chairman Jay Clayton urging the SEC and Financial Industry Regulatory Authority (“FINRA”) to address the issue of broker-dealer custody of digital securities.  

Although SEC Commissioner Hester Peirce has long championed the need for both regulatory and technological innovation in the crypto space, the SEC and FINRA have made slow progress towards finding a solution that would permit broker-dealer custody of digital securities.  The last major pronouncement on this issue was a 2019 Joint Statement by the SEC Division of Trading and Markets and FINRA’s Office of General Counsel that highlighted some important considerations regarding the custody of digital securities but provided few answers to industry participants.