SEC Enacts Expedited T+1 Settlement and Custody Mandates for Spot Digital Asset ETFs

WASHINGTON — The Securities and Exchange Commission (SEC) voted 3-2 on Monday to approve comprehensive regulatory amendments to Exchange Act Rule 15c6-1, establishing mandatory one-day (T+1) settlement cycles, strict real-time trade reconciliation, and independent multi-signature cold-storage custody verification for spot digital asset exchange-traded products (ETPs).

The regulatory package, advanced by SEC Chair Gary Gensler, eliminates regulatory ambiguities surrounding authorized participant arbitrage mechanisms, in-kind share redemptions, and weekend market volatility exposures across the rapidly expanding $95 billion spot cryptocurrency ETF sector.

Eliminating Settlement Counterparty Risk on Wall Street Under the modernized framework, institutional broker-dealers and registered custodial trusts managing crypto ETPs must execute transaction clearing through central counterparty clearinghouses registered with the National Securities Clearing Corporation (NSCC) within 24 hours of trade execution.

"The transition to T+1 settlement across our equity and exchange-traded markets has substantially reduced counterparty risk, margin requirements, and liquidity strains during periods of elevated volatility," SEC Chair Gary Gensler said in Washington. "These new rules ensure that spot digital asset exchange-traded products adhere to the exact same rigorous central clearing, anti-fraud, and segregated custody protections that safeguard American investors in traditional capital markets."

Segregated Cold-Storage Custody Audits Key provisions of the finalized SEC order mandate:

• Proof-of-Reserve Cryptographic Attestations: ETP custodians must publish daily, independently audited Merkle-tree cryptographic proof-of-reserves verifying that 100 percent of underlying digital assets are held in segregated, unencumbered on-chain cold storage.
• Banning Co-Mingling and Rehypothecation: Explicitly prohibiting custodians from lending, staking, or rehypothecating ETF asset reserves for proprietary trading.
• Real-Time Surveillance-Sharing Pacts: Mandating automated trade-feed integration between regulated spot digital asset trading venues and national securities exchanges.

Wall Street asset managers and exchange operators welcomed the finalized clarity, noting that uniform settlement standards pave the way for diversified multi-asset index funds and expanded pension fund allocations.