• The United States Securities and Exchange Commission (SEC) has proposed a new rule that may make it more difficult for cryptocurrency firms to serve as digital asset custodians in the country.
• SEC Chairman Gary Gensler said that some crypto trading platforms are not qualified custodians, and that they must comply with additional hoops such as annual audits from public accountants.
• Commissioner Hester Peirce expressed concern that this proposal would discourage investors from using entities with adequate safeguarding procedures to prevent fraud and theft.
Proposed SEC Rule
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. As per SEC Chairman Gary Gensler’s statement, the said proposal, pending official approved by the regulating body, recommends amendments to the 2009 Custody Rule that will apply to custodians of all assets, including cryptocurrencies. 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.
Qualified Custodian Requirements
According to Gensler’s statement, all firms operating in the U.S., if they wish become qualified custodians under this newly proposed rule must segregate all custody assets including digital ones and also comply with additional hoops such as annual audits from public accountants among other transparency measures.
Commissioner Peirce’s Response
Commissioner Hester Peirce did not support this particular proposal stating that such stringent measures would compel investors to withdraw their assets from entities which have established adequate safeguarding procedures in order mitigate and prevent frauds and thefts. He further added that this timeframe will not allow public enough time vet all aspects of the proposal thoroughly before implementation.
Industry Track Record
Citing industry’s track record Gensler said few crypto firms were trustworthy enough to serve as qualified custodians which is why he proposed this amendment in first place .
The proposed amendment by SEC is an effort regulate cryptocurrency industry better ensuring investor’s funds are safe however critics fear it might adversely affect investments made through these platforms due its strict provisions .