SEC Fits Brokers with a Crypto Load-Bearing Wall, Treasury Pulls Back the Surveillance Hand

Right after the midterms, Washington’s administrative path moves in two directions at once: the SEC sends broker-dealer capital and custody rules to the White House for review, while FinCEN withdraws a six-year-old plan to expand cross-border surveillance, with rulemaking and rollback racing on the same track.

SEC Pushes the Broker Load-Bearing Wall Toward Crypto Assets

On November 3, the day of the midterm elections, the SEC quietly sent a draft rule to the White House. The federal review record of OIRA (the Office of Information and Regulatory Affairs) shows the proposal, numbered RIN 3235-AN48 and titled “Amendments to Broker-Dealer Financial Responsibility and Recordkeeping and Reporting Rules Regarding Crypto Assets,” sits at the proposed-rule stage, is marked “economically significant,” and has no statutory deadline. The full draft text has not been released, but the SEC’s regulatory agenda has already named the provisions targeted for amendment: 15c3-1 (net capital), 15c3-3 (customer protection), 17a-3 (recordkeeping) and 17a-4 (record retention), under Sections 15(c) and 17(a) of the Securities Exchange Act of 1934.

In traditional finance, these rules are the load-bearing walls of the brokerage house. Rule 15c3-1 determines how much liquid capital a broker-dealer must hold to survive its liabilities; Rule 15c3-3 determines how customer securities and funds are segregated and when they enter reserve accounts; Rules 17a-3/17a-4 determine which records must be kept and for how long. When the load-bearing wall meets a distributed ledger, questions multiply: does a private key count as “physical possession”? Can an on-chain ledger replace 17a-3’s daily records? At what haircut should customer tokens be counted in net capital? An SEC spokesperson told Bloomberg that the Commission expects to consider “fit-for-purpose” rules for crypto markets.

This draft is an upgrade of the December 17, 2025 staff statement. Back then, the SEC’s Division of Trading and Markets opened the door for the first time: a broker-dealer could treat direct on-chain custody as “physical possession” under Rule 15c3-3(b)(1), provided it met conditions including private-key protection, on-chain risk assessment, contingency plans for hard forks and 51% attacks, and transfer arrangements in liquidation or bankruptcy. The same statement sketched the capital haircut outline: proprietary holdings of bitcoin and ether at a 20% haircut, and qualifying payment stablecoins at only 2%. But staff guidance carries no legal force; once a formal rule lands, it becomes an enforceable standard.

The gap between 20% and 2% is the real economic ledger for brokers holding digital assets. The higher the haircut, the more net capital a broker must set aside for the same exposure, and the lower its business ceiling. If the 2% stablecoin haircut is written into formal rules, combined with the GENIUS Act’s full effect on January 18, 2027, compliant payment stablecoins will be treated as “cash-like” assets on broker balance sheets, a shift that pushes traditional financial institutions to adopt stablecoins for settlement and cash management more effectively than any marketing pitch.

FinCEN and the Fed Pull Back the Six-Year-Old Surveillance Hand

On November 6, FinCEN and the Federal Reserve Board of Governors issued a joint withdrawal notice, formally abandoning the October 2020 proposal to amend the Travel Rule and Recordkeeping Rule. That proposal would have lowered the recordkeeping and information-sharing threshold for cross-border funds transfers from $3,000 to $250, and would have explicitly brought convertible virtual currencies (CVC) and digital assets with legal-tender status into the rules’ coverage. The withdrawal takes effect upon Federal Register publication on November 9.

The reasons are blunt: the proposal had been pending for more than five years, the CVC industry and the regulatory landscape had changed materially, and any similar amendment would need fresh public input. FinCEN explicitly cited the GENIUS Act’s payment-stablecoin framework and the July 2025 White House digital-assets report, saying future crypto-related amendments should be considered in light of these developments. The agencies committed clearly: “no final rule will be issued without an additional opportunity for public comment.”

This is not an isolated event. Over the past month-plus, the Treasury has withdrawn three surveillance-expansion plans in a row: in October it pulled the 2020 proposal targeting self-hosted wallets, in the same month the enhanced reporting rule for international crypto mixing from 2023, and now the 2020 Travel Rule. Coin Center wrote on the withdrawal day that the collective end of these three proposals “closes the books on several long-pending proposals that would have expanded the BSA’s already extensive financial surveillance regime.”

Withdrawal is not exemption. The existing $3,000 threshold remains in force, and crypto exchanges, as regulated money transmitters, continue to carry Travel Rule obligations for $3,000-equivalent transfers under FinCEN’s 2019 guidance. What regulators are shrinking is the impulse to widen the net, not the existing enforcement framework. On the other side, the Bank Policy Institute (BPI) wrote to the banking sector on November 6 calling for the AML gaps in the digital-asset ecosystem to be filled, urging the Treasury to assess “how to directly impose obligations on digital asset intermediaries,” while the Treasury is pulling rules back and being pushed by trade groups to press obligations onto intermediaries at the same time.

Implications for Practitioners