The collapse of FTX, Celsius, and many other large companies over the course of 2022 has meant that there has been rising pressure on the SEC to draft appropriate regulation that cracks down on illicit financial activity.
The question of custody has always been an extremely important one in the world of crypto, and gauging what constitutes an appropriately-qualified custodian has always been a large question mark, but the SEC now hopes to provide some clarity.
SEC to target “qualified custodians”
The SEC has long stated that they want firms to as responsible as possible when custodying crypto assts for their users, but until now there has been no clarification as to what actually constitutes a “qualified custodian”.
However, a new bill that is currently being drafted would set out some guidelines, which some fear may be too difficult for many preexisting firms to comply with, and may mean that the notion of being a “qualified custodian” is out of reach for many companies that are currently operating in the space.
A five member committee will vote on the proposal tomorrow and if the majority vote in favour of the proposal it will move forward to the next stage, which will require the SEC to seek further information from the industry as to their thoughts on such regulatory implementations.
Not everyone is happy about these changes
Regulatory clarity is a good thing, because people want to be certain that they are not breaking the law.
However, it seems that the SEC’s decisions over the course of the last few weeks have frightened many industry participants, and some are concerned that this will make it too difficult for companies in the US to compete.
SEC may try to make it very difficult for institutions to custody crypto. A proposal to change the def’n of qualified custodian to exclude trust companies would leave institutions with no way to custody crypto in compliance with the custody rule. https://t.co/ITpaZV2hFa
— Mike Selig (@MikeSeligEsq) February 11, 2023
Such concerns are legitimate, and it remains to be seen how the SEC will balance a desire to protect investors whilst also not crushing captains of the industry and pushing innovation abroad.
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