May 20, 2021

Vanessa Countryman
Secretary, Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090

RE: File No. S7-25-20: SEC Statement And Request For Comment on Custody of Digital Asset Securities by Special Purpose Broker-Dealers

Dear Ms. Countryman,

On December 23, 2020, the Securities and Exchange Commission (“SEC” or “Commission”) issued a statement describing certain conditions under which a broker-dealer could comply with the requirements of Rule 15c3-3 under the Securities Exchange Act of 1934 (hereinafter the “Customer Protection Rule” or “Rule 15c3-3”) with respect to digital asset securities (hereinafter the “Statement” or the “Custody of Digital Asset Securities by Special Purpose Broker-Dealers”).1

The Commission further requested comments on best practices with respect to custody of digital asset securities to consider in connection with any future rule-making or Commission action in this area. The Securities Industry and Financial Markets Association appreciates the opportunity to provide comments on this statement.2

Like many other industry participants and regulators alike, SIFMA recognizes the potential transformative effect of blockchain technology in the securities industry and welcomes the Commission’s efforts to provide needed clarity on the ability of broker-dealers to custody digital asset securities in compliance with the Customer Protection Rule.

In particular, SIFMA acknowledges and appreciates the Commission’s concerns about the unique attributes of digital asset securities and desire to protect investors while allowing broker-dealers to engage in customary broker-dealer activities with respect to digital asset securities. However, a unique, or different, risk profile does not necessarily mean risks are greater with respect to digital asset securities compared to traditionally represented securities. Additionally, SIFMA believes the Statement’s restriction of only allowing broker-dealers who exclusively engage in activities related to digital asset securities to provide custody of such securities will not best serve the interests of investors in every case, as explained below.

As such, SIFMA urges the Commission to take into consideration the following:

• The Definition of Digital Asset Security
• The Effectiveness of Special Purpose Broker-Dealers
• Proposed Control Frameworks and Industry Best Practices
• Clearance and Settlement Considerations
• Investor Protections