SEC Details How Brokers Can Custody Tokenized Stocks and Bonds

The U.S. Securities and Exchange Commission’s Trading and Markets Division has issued guidance clarifying how broker-dealers can custody tokenized securities—including tokenized stocks and bonds—under existing investor-protection rules. The guidance treats tokenized securities as traditional securities for custody purposes and explains how firms relying on Rule 15c3-3 can satisfy the ‘‘possession or control’’ requirement by maintaining exclusive control of the private keys needed to transfer tokens. Brokers must prevent customers or third parties from transferring tokens without broker approval and implement operational, security and governance safeguards tailored to blockchain risks such as 51% attacks, hard forks, airdrops and chain splits. The Division said it will not challenge broker-dealers that consider themselves custodians of crypto securities if they meet specified standards, but it did not create a new rule—rather it interprets how existing rules apply to tokenized regulated assets. Commissioner Hester Peirce noted remaining market-structure and disclosure questions for trading tokenized securities on exchanges and ATSs. The clarification reduces legal uncertainty, favors brokered custody over self-custody, and is likely to accelerate regulated product rollouts (exchanges and platforms exploring tokenized stock trading). For traders: expect stricter custody and compliance controls, potential improvements in institutional liquidity and regulated access to tokenized stocks and bonds, but also operational risks and phased product rollouts that may limit near-term liquidity.