• The US SEC recently voted in favor of a new proposal that seeks to expand the scope of 2009 Custody Rules
• This will make it harder for crypto firms to serve as custodians, and require them to comply with yearly audits conducted by public accountants
• Chair Gary Gensler has stated that the amendments would apply to all asset classes, not just cryptocurrencies
The US SEC Seeks to Expand Custody Rules in the Crypto Sector
The US Securities and Exchange Commission (SEC) recently saw a five-member panel vote on a new proposal that is supposed to build upon the 2009 Custody Rules. The vote resulted in 4 out of 5 members voting in favor, although the regulator has yet to officially approve the amendments.
If approved, the amendments will create more stringent requirements for crypto firms who wish to serve as custodians. All assets under custody must be properly segregated and subject to yearly audits conducted by public accountants. Additionally, there will be additional transparency measures required from would-be custodians.
Qualified Custodian Requirements
The SEC believes that only state or federal-charted banks, trust companies, savings associations, registered broker-dealers, futures commission merchants, or international financial institutions can meet their qualifications for qualified custodian status. Currently there are multiple crypto platforms offering custody services without proper qualification which raises safety concerns for investors and regulators alike.
Gary Gensler’s Statement
SEC Chair Gary Gensler himself confirmed that these rules will apply to all asset classes – including cryptocurrencies – when he said “make no mistake: Today’s rule covers a significant amount of crypto assets”. He also commented on numerous trading platforms claiming custody of investors‘ crypto but not providing adequate protection against commingling those assets with their own or other investors‘ holdings.
The proposed amendment aims to ensure better security standards when it comes to cryptos being held in custody by providing stricter guidelines and oversight measures for qualified custodian status. It remains yet unseen whether this proposal will be approved by the regulator but if it does pass – it could have a lasting impact on how crypto projects are managed and safeguarded moving forward.