Non-Security Crypto Assets Held by a Broker-Dealer are Not Protected by SIPC

On May 15, 2025, the staff of the Division of Trading and Markets issued a set of frequently asked questions ("FAQs") relating to crypto assets, and other topics. The FAQs may be seen HERE

The FAQs highlight that non-security crypto assets held by a broker-dealer are not protected by the Securities Investor Protection Act of 1970 ("SIPA"). SIPA, and the Securities Investor Protection Corporation ("SIPC") established thereunder, protects investors against financial losses if their brokerage firm fails. SIPC provides coverage for securities and cash in brokerage accounts, up to a maximum of $500,000, with a $250,000 limit for cash. SIPA is fundamentally tailored to securities, not commodities or other assets. These FAQs, by underscoring the absence of SIPA protection, remind investors about the risks they may face when holding non-security crypto assets through a broker-dealer.

The FAQs highlight that non-security crypto assets held by a broker-dealer are not protected by the Securities Investor Protection Act of 1970 ("SIPA")

The FAQs also note that the possession and control requirements of SEC Rule 15c3-3 are not implicated if a broker-dealer holds non-security crypto assets for customers. These requirements apply only to securities.