The U.S. Securities and Exchange Commission (SEC) has proposed stricter rules for fund managers for businesses that secure assets. This move could further restrict Bitcoin and altcoin platforms like Coinbase and Kraken as the industry faces constant pressure from regulators. Here are the details…
SEC’s crackdown on Bitcoin and altcoins continues
The SEC on Wednesday voted 4 to 1 to propose a rule that would expand the types of assets investment advisors such as hedge funds and pension funds must hold using qualified custodians. The new rule, if passed, would expand the scope of the protection mandate to cover all assets, including cryptocurrency, entrusted by financial advisors.
Banks, trust companies, and broker-dealers are the classic types of businesses that qualify as qualified custodians. Despite this, in the past few years, trading platforms like Coinbase have started offering services due to features related to preventing assets like Bitcoin from being stolen or hacked.
How will crypto currency exchanges be affected by this situation?
The action poses a new danger to the custody policies of cryptocurrency exchanges, as other federal regulators actively prevent depositors such as banks from holding consumer crypto assets. The changes also come at a time when the SEC is aggressively accelerating its enforcement efforts. Although the proposal does not separate crypto companies, cryptocoin.com As we have reported, the following words of SEC Chairman Gary Gensler were quoted:
Make no mistake: due to how crypto platforms generally work, investment advisors cannot trust them as qualified guardians. While some crypto trading and lending platforms may claim to keep investors’ cryptocurrencies, this does not mean that they are qualified custodians.
According to the website of cryptocurrency exchange Coinbase, the firm claims to be a qualified crypto custodian used by thousands of its institutional clients. The company’s custody services generated $68.4 million in revenue in the first nine months of 2022. This was 21 percent less than the same period the previous year.
Regulators focus on crypto
In response to Gensler’s alleged anti-crypto stance, SEC commissioner Hester Peirce noted that the Commission does not have the authority to directly regulate depositories. The Dodd-Frank Act of 2010, passed after the previous major financial disaster, authorizes Gensler’s agency to enforce these new rules in the broader crypto market. While the SEC was said to be investigating crypto custody issues recently, SEC officials claimed that the agency has been working on this plan for a long time and not in response to the recent “drama” regarding cryptocurrency.
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