SEC chair implies crypto exchanges may be ‘qualified custodians’ as new rule is drafted

United States Securities and Exchange Commission (SEC) seat Gary Gensler spoke astatine a gathering of the commission’s Investor Advisory Committee connected March 2 connected the taxable of plus custody. The committee has a projected regularisation for concern advisers connected safeguarding capitalist assets. It was the 2nd connection Gensler has made connected the projected rule. The archetypal was successful mid-February erstwhile the regularisation was archetypal proposed.

The existent custody rule, dating to 2009, covers “a important magnitude of crypto assets” and was designed to trim the hazard of advisers embarking connected Ponzi schemes. The caller regularisation expands safeguards to each plus classes, including crypto assets that are not funds oregon securities, and would heighten protections provided by qualified custodians, successful airy of caller authorities granted by Congress successful 2010, Gensler said.

The projected regularisation would besides necessitate written agreements betwixt advisers and custodians, adhd requirements for overseas institutions serving arsenic custodians and explicitly widen the safeguard rules to discretionary trading.

Related: Galaxy acquires organization crypto custody steadfast for $44M

Investment advisers, helium continued, cannot trust connected crypto platforms to execute custodial functions. He added:

“Just due to the fact that a crypto trading level claims to beryllium a qualified custodian doesn’t mean that it is. When these platforms neglect […] investors’ assets often person go spot of the failed company, leaving investors successful enactment astatine the bankruptcy court.”

To beryllium a “qualified” custodian nether the caller rule, a steadfast would request to ensure that each assets are decently segregated, taxable to yearly audits from nationalist accountants and undertake different transparency measures.

— The Roundtable Show (@RoundtableSpace) March 2, 2023

SEC commissioner Hester Peirce opposed the rule. She argued successful a connection that the caller regularisation would “encourage concern advisers to backmost distant instantly from advising their clients with respect to crypto.”