• The US Securities and Exchange Commission (SEC) has proposed new rules that will make it more difficult for cryptocurrency firms to serve as digital asset custodians.
• Chairman Gary Gensler believes that some crypto trading platforms are not qualified custodians and must comply with transparency measures such as annual audits.
• Commissioner Hester Peirce is concerned that the proposal will discourage investors from investing in digital assets.
SEC Proposal Makes It More Challenging For Crypto Firms to Serve As Digital Asset Custodians
The United States Securities and Exchange Commission (SEC) has given the go-ahead to a new crypto proposal. According to it, cryptocurrency firms will have a harder time serving as digital asset custodians in the country. Normally, a qualified custodian is a federal or state-chartered bank or savings association, trust company, registered broker-dealer, registered futures commission merchant, or foreign financial institution, according to the SEC.
Necessary Requirements For Crypto Firms
To become a qualified custodian under the newly proposed rules, all firms operating in the U.S. have to segregate all custody assets, including digital ones. There will also be additional hoops, such as annual audits from public accountants, among other transparency measures. According to SEC Chairman Gary Gensler’s statement: „When these platforms go bankrupt—something we’ve seen time and again recently—investors‘ assets often have become property of the failed company, leaving investors in line at the bankruptcy court.“ Citing the industry’s track record, Gensler added that few crypto firms were trustworthy enough to serve as qualified custodians..
Commissioner Peirce Opposes The Proposal
Commissioner Hester Peirce did not support the proposal however. He said: „Such sweeping statements in a rule proposal seem designed for immediate effect, a function proposing releases should not play. These statements encourage investment advisers to back away immediately from advising their clients with respect to crypto.“ According to Peirce, such stringent measures will compel investors to withdraw their assets from entities that have established adequate safeguarding procedures to mitigate and prevent fraud and theft..
Concerns Of Investors May Rise
Peirce is worried that this timeframe will not allow for sufficient public vetting of all aspects of the proposal which could lead investors becoming more wary of investing in cryptocurrencies due its potential security issues over potential gains they may make on them..
Final Thoughts On The Proposal
The newly proposed rules by the SEC may bring down investments into cryptocurrencies if implemented since it would lead investors feeling reluctant about investing due its uncertain future when it comes security issues stemming from digital asset custody services being provided by unqualified companies..