SEC Chair Gary Gensler’s Proposed Rule on Crypto Exchanges and Qualified Custodians

U.S. SEC Chair Gary Gensler has recently proposed a rule that directs investment advisers to seek qualified custodians for asset storage, including cryptocurrency. This has caused concern for crypto exchanges such as Coinbase, as Gensler has expressed his skepticism regarding their ability to serve as secure and certified custodians for investment advisers.

Gensler cited previous bankruptcies in the crypto industry, emphasizing that customers’ assets held on insolvent platforms are now a part of the estate, rather than being returned directly to the customers. This has led to Gensler stating that just because a crypto trading platform claims to be a qualified custodian, it doesn’t necessarily mean it is.

Furthermore, Gensler highlighted that investment advisers cannot currently rely on crypto lending and trading platforms as qualified custodians. The SEC chief stated that advisers are required to protect investors’ crypto funds and securities with qualified custodians, such as banking institutions, trust corporations, and securities broker-dealers.

The extended custody regulation, which has been endowed to the SEC by Congress, would ensure that investment advisers do not misuse, lose, or act irresponsibly with their client’s money. As a result, crypto exchanges such as Coinbase may face trouble in providing their custodian services to investment advisers.

This move by the SEC is part of a growing crackdown on the crypto industry, as the regulator aims to protect investors and prevent fraud. At the time of writing, the price of Bitcoin (BTC) was trading at around $23,370 with a market cap of $451 billion.

For more articles visit: Cryptotechnews24

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