The U.S. Securities and Exchange Commission (SEC) and the U.S. Financial Industry Regulatory Authority (FINRA) issued a joint statement on Monday that examines how federal securities laws and FINRA’s self-regulatory rules may apply to digital securities and transactions.

The guidance set out compliance considerations for brokerage firms based on historical regulatory principles when it comes to dealing in digital assets. It noted that applying existing rules and requirements to the emerging digital asset markets raises “novel and complex regulatory and compliance questions and challenges.”

To start, the regulators maintained that existing custody requirements apply to all types of securities.

“Whether a security is paper or digital, the same fundamental elements of the broker-dealer financial responsibility rules apply,” they said.

Yet, they also acknowledged that there “are many significant differences in the mechanics and risks associated with custodying traditional securities and digital asset securities.”

For instance, the regulators noted that the way digital assets are issued, held and transferred “may create greater risk that a broker-dealer maintaining custody of them could be victimized by fraud or theft, could lose a ‘private key’ necessary to transfer a client’s digital asset securities, or could transfer a client’s digital asset securities to an unknown or unintended address without meaningful recourse to invalidate fraudulent transactions, recover or replace lost property, or correct errors.”

Additionally, regulators said that brokers may be challenged in determining whether they, or a third-party custodian, maintains custody of digital securities.

Similarly, firms may have difficulty in complying with books and records requirements, as well as auditing rules, when it comes to digital assets.

The regulators also said that they support ongoing efforts to comply with traditional custody rules when it comes to digital assets, but that this remains a work in progress.

“The specific circumstances where a broker-dealer could custody digital asset securities in a manner that the [regulators] believe would comply with the customer protection rule remain under discussion,” they said, adding that they “stand ready to continue to engage with entities pursuing this line of business.”

“[SEC and FINRA staff] encourage and support innovation and look forward to continuing our dialogue as market participants work toward developing methodologies for establishing possession or control over customers’ digital asset securities,” they added.