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ARTICLE · 08 DECEMBER 2020

Settlement Of Digital Asset Trading Just Got Easier

Latham & Watkins LLP
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SEC relief streamlines noncustodial settlement of digital asset trades, but broker-dealer custody is still off-limits.

United StatesTechnology
Stephen P. Wink
Stephen P. Wink
Naim Culhaci
Naim Culhaci
Deric Behar
Deric Behar

On September 25, 2020, the US Securities and Exchange Commission (SEC) issued a no-action letter (the Letter) granting more leeway to registered alternative trading systems (ATSs) that settle trades involving digital asset securities. The no-action relief is intended to reduce operational and settlement risks that ATSs face as they seek ways to provide noncustodial digital asset services, including settlement of trades involving virtual currencies, coins, and tokens.

Context: 2019 Joint Statement

On July 8, 2019, the SEC and FINRA issued a joint staff statement (the Joint Statement) maintaining that given certain regulatory concerns — particularly those pursuant to the custodial requirements under Rule 15c3-3 of the Securities Exchange Act of 1934 (Customer Protection Rule) — broker-dealers were not yet permitted to custody digital assets. (See Can Broker-Dealers HODL? SEC and FINRA Say Keep It Noncustodial for Now.) However, the Joint Statement specified a few

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