The United States SEC Chairman, Gary Gensler, wants to amend custody rules to cover all cryptocurrencies. This could be due to the recent collapses of many crypto firms and investors losing their funds because they handed over the ownership of their coins to the platform while signing up. Gensler said that many crypto firms claim custody of their customer assets even though they need to be qualified to do the same.
New custody rules in the US
Even though the changes have yet to be made, Gary suggested them. This will help expand the role of custodians, who are given the authority to manage customer assets. It will be great if crypto is added to the new proposal because all companies who want custody of their customer assets will need to get approval and register with the authorities. It will surely bring a lot of security to customer funds.
The Chairman of the Securities and Exchange Commission (SEC) outlined four essential changes to the current regulations. According to the Chairman, the initial proposal seeks to ensure proper segregation of customer assets. Secondly, advisers and qualified custodians will be obligated to enter into written agreements to guarantee the custodian’s protections, which include public accountant evaluations, account statements provision, and records accessibility upon request. This requirement marks the first of its kind.
The proposal also includes a provision that explicitly extends the safeguards of the custody rule to discretionary trading, wherein an adviser buys or sells assets on behalf of an investor. Additionally, the proposal seeks to strengthen the requirements for foreign financial institutions that serve as qualified custodians or sub-custodians to qualified custodians. Gensler provided a detailed explanation of these enhancements.
The problem
When crypto companies go bankrupt, it’s seen that customer assets become a part of the bankruptcy filing. They are also often at the end of the line regarding priority on who will get back their assets. This is why it is essential to have standard laws and practices for the custody of cryptocurrencies.
What are your thoughts as the SEC Chairman suggests amendment of custody rules to cover all cryptocurrencies? And do you think it will protect investors? Let us know in the comments below. And, if you found our content information, share it with your family and friends.
