U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler has proposed amending federal custody regulations to cover “all cryptoassets.” The head of the SEC said: “While some cryptocurrency trading and lending platforms may claim to hold investors’ cryptocurrencies, this does not mean that they are qualified custodians.”
Gary Gensler Proposes To Include Cryptocurrency In Extended Storage Rules
US Securities and Exchange Commission (SEC) Chairman Gary Gensler announced on Wednesday that he has proposed changes to federal regulations “to expand and strengthen the role of qualified custodians.”
According to his proposal, all asset classes, including cryptocurrencies, will be included in the extended custody rules, and companies offering cryptocurrency custody services to their customers will need to register. Gensler emphasized:
Today’s offer, covering all asset classes, will cover all crypto assets.
The SEC chairman highlighted four key proposed changes to the existing rules. First, the proposal will help ensure that clients’ assets are “properly segregated,” he said. Second, for the first time, advisors and qualified custodians will be required to “enter into written agreements with each other that help ensure the protection of the custodian,” Gensler explained, adding that they include requiring custodians to undergo an annual assessment by government accountants, provide a statement of and provide records upon request.
The proposal also “explicitly states that the safeguards of the custody rule apply to discretionary trading – where an advisor would seek to buy or sell an investor’s assets on behalf of the investor,” Gensler described. In addition, it “will increase the requirements for foreign financial institutions that act either as qualified custodians or as sub-custodians for a qualified custodian,” he specified.
“While some cryptocurrency trading and lending platforms may claim to hold investors’ cryptocurrencies, this does not mean that they are qualified custodians,” the SEC chairman emphasized, elaborating:
Based on how crypto platforms typically operate, investment advisors cannot rely on them as qualified custodians.
The current rules already cover “a significant number of crypto assets,” Gensler pointed out, noting that most crypto assets “are likely to be crypto asset funds or securities that are covered by the current rule.”
Reaffirming his concerns that cryptocurrency platforms are not separating client assets properly, the SEC chairman said:
Instead of properly separating investors’ cryptocurrencies, these platforms mix these assets with their own cryptocurrencies or other investors’ cryptocurrencies.
“When these platforms go bankrupt — which we’ve seen over and over again lately — investors’ assets often become the property of the bankrupt company, leaving investors waiting in bankruptcy court,” Gensler warned. Last year, a number of crypto firms filed for bankruptcy, including FTX, Celsius Network, Voyager Digital, Three Arrows Capital (3AC) and Blockfi.
The SEC has been active in the crypto space lately. Last week, the securities watchdog blamed the Kraken cryptocurrency exchange for its staking program. The commission also sent a Wells notice to Paxos regarding the Binance USD (BUSD) stablecoin, arguing that the cryptocurrency is a security and that Paxos should have registered the offer under federal securities laws. Binance CEO Changpeng Zhao (CZ) subsequently warned of “profound consequences” for the crypto industry if BUSD is recognized as a security.
Do you think SEC Chairman Gary Gensler’s proposal will help or hurt the crypto industry? Let us know in the comments below.
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Credit : news.bitcoin.com
