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Proposed SEC Custody Rules Criticized as 'War on Crypto'

Key Takeaways
  • SEC proposes new rules for investment advisors to hold cryptocurrency on behalf of clients.
  • Industry groups criticized the proposal, arguing it goes beyond SEC's authority and could put investors' money at risk.
  • SEC's decision will have a significant impact on the future of the crypto industry in the US.
09-May-2023 By: Aditi Tiwari
Proposed SEC Custody

The US Securities and Exchange Commission (SEC) has proposed new rules that would make it harder for investment advisors to hold cryptocurrency on behalf of their clients. 

These rules aim to make sure that investors' money is protected in case of loss or theft. The proposal has received criticism from two industry groups, the Blockchain Association and Andreessen Horowitz (a16z). They argue that the proposed rules go beyond the SEC's authority and could prevent advisors from trading cryptocurrency with exchanges. This would put investors' money at risk.

The Blockchain Association is concerned that the proposed rules would make it harder for advisors to transact with crypto exchanges, leaving investors' assets at risk. a16z is worried that the proposed rules would make it illegal for investment advisors to trade cryptocurrency on centralized exchanges and could violate the SEC's duty of care requirements.

The SEC's proposed rules aim to ensure that cryptocurrency custodians, including exchanges, are protecting investor assets. Custodians would need to have annual audits from public accountants and properly segregate assets to prevent loss or theft. SEC Chair Gary Gensler has criticized some crypto exchanges that offer custody services, claiming that they are not qualified to do so.

Proposed SEC Custody Rules Cause Concern for Crypto Industry in the US

Critics of the proposed rules worry that they will have a negative impact on the crypto industry. They believe that the rules will make it harder for investors to hold and trade cryptocurrency. The crypto industry has already faced significant regulatory challenges, and some worry that the proposed rules will make it even harder for crypto companies to operate in the US.

The SEC is currently reviewing comments from industry groups and other stakeholders before making a decision on the proposed rules. The outcome of the review will have significant implications for the future of the crypto industry in the US and the role of regulation in the space.

Also read- 24 Hrs Crypto Update, May 08: BTC below $28k; Litecoin, Polygon, Dogecoin shed up to 5%

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