Hold onto Your Crypto Keys: SEC Pauses Crypto Custody Rule Amid Industry Displeasure
Regulatory shiftsAdjust crypto custody standards, as outlined by the Securities and Exchange Commission (SEC)
The Securities and Exchange Commission (SEC) is reconsidering its controversial proposal for tightened crypto custody rules for investment advisers, citing widespread industry discontent.
Acting SEC Chairman Mark Uyeda admitted that public feedback raised substantial objections, particularly over the proposal's overarching scope. Critics argued that the rule could inadvertently restrict cryptocurrency firms' access to compliant custodians, as many federally chartered banks are hesitant to handle digital assets.
"The proposed approach to custody appears to mask a policy decision to block access to crypto as an asset class," Uyeda said in February 2023.
Former House Financial Services Committee Chair Patrick McHenry also weighed in, expressing concerns that the rule could leave firms without viable crypto custody solutions.
In response, the SEC is collaborating with the White House's crypto task force to explore alternative approaches. Uyeda stressed the need for regulators to align their efforts with statutory authority and ensure affordable compliance measures.
Uyeda highlighted potential revisions to a rule requiring mutual and exchange-traded funds (ETFs) to report portfolio holdings monthly instead of quarterly. Critics argued that the rule could result in excessive compliance costs and artificial intelligence-driven data analysis risks.
These developments suggest a shift in SEC policy direction under the current administration. Uyeda's tenure has already seen regulatory rollbacks on several crypto-related initiatives introduced during former SEC Chair Gary Gensler's leadership.
The SEC has softened its stance on various crypto-related matters, such as rescinding accounting guidance for crypto firms, abandoning certain enforcement actions, and establishing a specialized crypto task force. With former SEC Commissioner Paul Atkins poised to take over as chair, the commission appears to be moving toward a more industry-friendly stance.
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Harold, a seasoned finance journalist with over four years in the field, is passionate about making financial complexities clear and insightful. He aims to bring clarity to the ever-evolving world of finance and crypto.
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It appears that the SEC's crypto custody rule is currently undergoing reconsideration due to significant objections raised by industry stakeholders. The rule, introduced in February 2023 under former SEC Chair Gary Gensler, sought to expand custody requirements beyond traditional client funds and securities to include cryptocurrency assets. Critics argued that the outdated rule could inadvertently restrict cryptocurrency firms' access to compliant custodians, as many federally chartered banks have been reluctant to handle digital assets. In response, the SEC is exploring alternative approaches to crypto custody regulation while collaborating with the White House's crypto task force. Recent developments suggest a potential shift in SEC policy direction towards a more balanced and practicable approach that ensures investor protection without unnecessarily blocking crypto asset management. Stay tuned for updates on this developing story.
- The Securities and Exchange Commission (SEC) has paused its proposal for tightened crypto custody rules for investment advisers, citing widespread industry discontent and concerns over unintended restrictions on cryptocurrency firms' access to compliant custodians.
- Former House Financial Services Committee Chair Patrick McHenry and Acting SEC Chairman Mark Uyeda have expressed concerns that the updated crypto custody rule could leave firms without viable crypto custody solutions, prompting the SEC to collaborate with the White House's crypto task force to explore alternative approaches.
- With a shift in SEC policy direction under the current administration, former SEC Commissioner Paul Atkins may lead the commission towards a more industry-friendly stance as they soften their stance on various crypto-related matters and reconsider policies introduced during the previous leadership.
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