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The U.S. Securities and Exchange Commission (SEC) is reconsidering its earlier-proposed rule that would mandate investment advisers to keep crypto assets with qualified custodians. Acting SEC Chair Mark Uyeda has just announced that the agency would be reconsidering the rule after receiving pushback from both traditional financial institutions and crypto companies.
Industry Pushback
The initial rule, proposed during former SEC Chair Gary Gensler’s tenure, aimed to beef up investor protection by requiring that digital assets are kept by approved custodians of the SEC. The plan was criticized, though, by crypto industry captains and financial institutions, who saw it as introducing unnecessary constraints on access to custodial services.
Many crypto firms contend that the rule fails to account for the unique nature of digital assets and the evolving landscape of blockchain-based finance. Traditional financial institutions have also raised concerns, pointing out that regulatory uncertainty could stifle innovation and prevent them from offering crypto custody services to clients
What This Means for Investment Advisers
Should the SEC alter its approach, investment advisors would receive increased freedom when deciding who is qualified to custodial crypto holdings held by clients. This will leave room for future custodian models that reflect better the industry demands of the digital assets, ensuring that protectionist measures stay intact.
Uyeda’s announcement portends a possible change in the SEC’s regulatory position on digital assets. As the agency has thus far proceeded with caution in overseeing cryptocurrencies, this reconsideration indicates a desire to work with industry participants and evolve in response to shifting market forces.
The Road Ahead
The SEC has yet to give a timeline for when a new proposal would be submitted. Industry players, though, are eagerly awaiting a better-balanced framework that will encourage innovation without sacrificing investor security.
Wait for more information as the SEC pushes forward in reviewing crypto custody regulations and their implications on investment advisers and the wider digital asset market.
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