US Securities And Exchange Commission (SEC) Chairman Gary Gensler has proposed altering federal laws to include “all crypto assets” in their custody rules. The SEC chief noted: “Although some cryptocurrency trading and lending platforms may claim custody of investors’ cryptocurrencies, that does not mean they are qualified custodians.”

Gensler Suggests Modifying Existing Custody Regulations To Include Cryptocurrencies

US Securities And Exchange Commission (SEC) Chairman Gary Gensler indicated Wednesday he has proposed amendments to federal regulations “to expand and enhance the role of qualified custodians.”

All asset classes and cryptocurrencies would be included in the expanded custody regulations. Companies that provide cryptocurrency custody services to their clients would need to register. Gensler emphasized:

Today’s Proposal to cover all asset classes and include all crypto assets.

The SEC chair outlined 4 major proposed changes to existing regulations. First off, this proposal should ensure that customer assets are safeguarded “are properly segregated,” he said. Second, advisors and qualified custodians may be required, for the first time ever, “enter into written agreements with each other that help ensure custodian protection,” Gensler detailed. These involve custodians undergoing examinations annually by certified public accountants. When requested, they must provide account statements and furnish data.

The Additional proposal would “make explicit that the safeguards of the custody rule apply to discretionary trading, when an adviser seeks to buy or sell an investor’s assets on behalf of an investor,” Gensler explained. It could also be a good idea to “enhance the requirements for foreign financial institutions acting as a qualified custodian or as a sub-custodian of a qualified custodian,” he detailed.

“Although some cryptocurrency trading and lending platforms may claim custody of investors’ cryptocurrencies, that does not mean they are qualified custodians,” the SEC chairman highlighted, adding:

Based On how crypto platforms usually work, investment advisors cannot consider them as qualified custodians.

Existing laws already cover “a significant number of crypto assets,” Gensler noted, mentioning that crypto assets are largely “likely to be crypto asset funds or securities covered by the current rule.”

Reiterating SEC Chairman John McMahon’s worry about crypto platforms not correctly segregating customer assets.

Instead These platforms are unable to properly separate investors’ cryptocurrencies and have combined them with other buyers’ or their own cryptocurrencies.

“When these platforms fail, something we’ve seen time and time again recently, investors’ assets often become the property of the failed company, leaving online investors in bankruptcy court,” Gensler warned. In the last 12 months, a number of cryptocurrency companies have filed for bankruptcy including FTX. Celsius Network, Voyager Digital, Three Arrows Capital (3AC), Blockfi.

Do you believe that SEC Chairman Gary Gensler’s proposal will help or hurt the crypto industry? Let us know via the comment section.

kevin helms

KevinAnonymous Austrian economics scholar, discovered Bitcoin He was an evangelist in 2011 His pursuits lie in Bitcoin Safety, open-source systems, community effects and the intersection of cryptography and economics.