Report: SEC Draft Proposal Aims to Impose Restrictions on Crypto Firms Acting as ‘Qualified Custodians’
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As per the Bloomberg report published on February 14th, insiders with knowledge of the matter suggest that the United States Securities and Exchange Commission (SEC) is formulating a draft proposal that could impede crypto firms from performing as “qualified custodians” of their clients’ digital assets.
This could potentially impact the hedge funds, private equity firms, and pension funds that associate with such crypto firms.
The sources suggest that the SEC’s five-member panel will vote on the proposal’s viability on February 15th, requiring at least three affirmative votes to move forward to the next stage.
The proposal will be subject to revision and amended accordingly after incorporating feedback in case of approval.
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Sources state that the SEC has been deliberating on the requirements for becoming a qualified custodian of cryptocurrencies since March 2019, but it remains unclear what specific changes the regulator is seeking.
Should the proposal be finalized, some crypto firms may need to relocate their clients’ digital assets elsewhere, potentially leading to surprise audits and other consequences.
This news follows a Jan. 26 Reuters report indicating that the SEC would soon investigate Wall Street investment advisers’ crypto custody practices. Additionally, the SEC has been engaged with Paxos Trust, issuer of the Binance USD (BUSD) stablecoin, which they have identified as an unregistered security.
Paxos Trust has declared its readiness to litigate the matter vigorously if necessary.
