A proposal by US securities regulators to tighten custody rules for cryptocurrencies has faced opposition from at least two industry supporters, according to recently filed letters.
On May 8 the deadline for comments on the proposal crypto industry advocacy body the Blockchain Association submitted a letter to the US Securities and Exchange Commission (SEC) criticizing its proposed changes to its regulatory rules.
A similar letter was sent three days earlier by Web3 venture capital fund Andreessen Horowitz (a16z). The association's policy attorney, Marisa Tashman Coppel, tweeted on May 8 that the rule would “significantly reduce investment in digital assets,” claim ing that in its current form, , the provision is "illegal".
That same day, a16z's general counsel, Miles Jennings, tweeted a letter calling the company “unambiguous” and calling the SEC's proposal a “misguided and transparent attempt to wage war on cryptocurrencies.” . than a dozens of separate arguments to reject the SEC. Among other statements, it said the rule exceeded the SEC's purview, would prohibit advisors from trading with cryptocurrency exchanges, and put investors' assets at greater risk.
A16z detailed a similar argument in its letter, but focused more on its implications for registered investment advisors, namely that advisors would be barred from using cryptocurrencies and that the rules could violate the SEC's duty of care for such firms. it "illegal, unworkable and dangerous" to ban advisors from trading cryptocurrencies on centralized exchanges. The February proposal, which has not yet been approved by the US Securities and Exchange Commission, would impose stricter rules on investment advisors' custody of assets, including ding cryptocurrencies.
Companies need to properly segregate assets, customers need to be subject to annual audits by public accountants, and a host of other transparency measures. Gensler specifically targeted cryptocurrency exchanges under the rule, saying that some cryptocurrency ex changes that offer custody services are not true “qualified custodians.” The proposal was even opposed within the SEC. Commissioner Hester Pierce questioned the "feasibility and breadth" of the rule and its seemingly targeted targeting of cryptocurrencies and cryptocurrency-related companies.
