SEC Proposes Tougher Rules as Part of Its Crypto Custody Crackdown

A five-member panel of the United States Securities Exchange Commission (SEC) has voted 4-1 in favor of a proposal that may make it more difficult for cryptocurrency firms to serve as digital asset custodians in the future.

The proposal, which is yet to be officially approved by the SEC, recommends amendments to the "2009 Custody Rule" will apply to custodians of "all assets" including cryptocurrencies, according to a Feb. 15 statement from SEC Chairman Gary Gensler.

Gensler stated that currently, some crypto trading platforms that are offering custody services are not actual "qualified custodians."

According to the SEC, a qualified custodian is generally a federal or state-chartered bank or savings association, trust company, a registered broker-dealer, a registered futures commission merchant or a foreign financial institution.

In order to become a "qualified custodian" under the newly proposed rules, U.S. and offshore firms would additionally need to ensure that all custodied assets — including cryptocurrencies — are properly segregated, while these custodians will be required to jump through additional hoops such as annual audits from public accountants, among other transparency measures.

However, not every SEC member is on board with Gensler’s plans.

While the proposal isn't "regulation by enforcement" per se, Commissioner Hester Peirce said "the latest SEC statement seems designed for immediate effect" to take down the crypto industry.

As for the proposal itself, Peirce believes it would do more harm than good. She said that such stringent measures will force investors to remove their assets from entities that have developed sufficient safeguarding procedures to mitigate and prevent fraud and theft.

(Source: CoinTelegraph)