As long as crypto platforms and lenders aren’t registered as exchanges or banks, they wouldn’t be able to offer certain services that the SEC has proposed would be limited for registered investment advisers. These services include custody of assets.
The U.S. Securities and Exchange Commission (SEC) is proposing a rule that would effectively require registered investment advisers to go outside the crypto industry for storing digital assets, according to its first formal policy push that leans heavily into the cryptocurrency sector.
The SEC is scheduled to propose a new rule on Wednesday that would expand the agency’s regulations on safeguarding customers’ assets. Under the new rule, investment advisers would be required to keep any assets they are entrusted with – including crypto – with a “qualified custodian.”
Crypto Trading and Lending Platforms Struggle to Become SEC-Qualified Custodians
The SEC has released a statement warning crypto trading and lending platforms that they may not be considered “qualified custodians” under the regulator’s regulations. This could have a significant impact on these platforms, as a “qualified custodian” is generally a chartered bank or trust company, a broker-dealer registered with the SEC or a futures commission merchant registered with the CFTC.
that use these platforms to provide investment advice to their clients are required to register with the SEC,” Cryptocurrencies have been in the spotlight recently, with several major announcements from government officials. The SEC has announced that investment advisers who use cryptocurrency platforms to provide investment advice to their clients are required to register with the SEC. This rule is not specific to cryptocurrencies, but the industry featured heavily in the formal remarks previewing it.
Though some crypto trading and lending platforms may claim to custody investors’ crypto, the SEC Chair Gary Gensler warns that this does not mean they are qualified custodians. In a statement, Gensler said that “crypto cannot rely on them as qualified custodians.
The SEC has proposed that investment advisers only trust regulated financial institutions with their customers’ money. This would mostly leave crypto businesses on the outside. The proposal also says those qualified custodians would be subject to independent audits, regular disclosures and would need to segregate customer assets into accounts under the customers’ identity.