Emmer: SEC must address broker-dealer custody of digital securities

U.S. Rep. Tom Emmer (R-MN) led a bipartisan contingent of several lawmakers to request that the U.S. Securities and Exchange Commission (SEC) provide clarity for digital securities.

“Regulators under this administration have been open and willing to support new technologies,” Rep. Emmer said in a statement. “However, it is still critical that they continue to keep up with the pace of innovation.” 

In a Dec. 9 letter sent to SEC Chairman Jay Clayton, Rep. Emmer and eight other lawmakers, including U.S. Rep. Bill Foster (D-IL), encouraged the SEC and the Financial Industry Regulatory Authority (FINRA) to address broker-dealer custody of digital securities.

They asked that the SEC develop requirements necessary to custody digital securities and enable FINRA to approve broker-dealer applications that meet requirements set on July 22 by the Office of the Comptroller of the Currency (OCC) clarifying that national banks may provide custody services for cryptographic assets. 

“The adoption of innovative technologies, including the issuance of securities via distributed ledgers, would improve the functioning of securities markets by making them more efficient, accessible, and transparent, which should be welcomed and encouraged,” wrote the congressmen. 

“I was heartened to see the OCC take a lead on this issue, and I encourage the SEC and FINRA to follow suit,” said Rep. Emmer, who co-chairs the Blockchain Caucus. “We know that strong financial markets attract investment and facilitate capital formation. To foster the digital asset industry in the United States, we need action now.”

Rep. Emmer and his colleagues urged the SEC to issue a formal clarification that banks may act as good control locations for the custody of digital securities; advise FINRA on the criteria that must be met for broker-dealers to custody digital securities for themselves and their customers; and instruct FINRA to approve broker-dealer applications that meet those requirements, according to their letter.

“With these important steps, we can cultivate a regulatory environment that supports financial innovations and will foster investment and competition in the United States,” said Rep. Emmer.