The U.S. Securities and Exchange Commission (SEC) is reportedly planning to propose new rule changes this week that could affect the services crypto firms can offer their clients.
Securities regulators are working on a draft proposal that would make it difficult for cryptocurrency firms to hold digital assets on behalf of their clients as “qualified custodians,” according to a Bloomberg report on Feb. 14, citing “people familiar with the matter.”
In turn, this could affect the many hedge funds, private equity firms and pension funds that work with such crypto companies. A five-member SEC panel will vote on Feb. 15 on whether to proceed to the next stage, according to the people cited.
The rest of the SEC will need a majority vote three out of five, to formally vote on the proposal. If approved, the proposal will be revised as necessary through feedback. The U.S. Securities and Exchange Commission has been considering what it takes to qualify as a cryptocurrency custodian since March 2019, but people familiar with the matter said it was unclear what specific changes the U.S. financial watchdog was seeking.
If finalized, Bloomberg explained that some cryptocurrency firms may have to move their customers' digital assets elsewhere.
Those financial institutions could be subject to "surprise audits" related to their custody relationships or other consequences, the report added. News of Wednesday’s vote proposal comes on the heels of a Jan. 26 Reuters report suggesting the U.S. Securities and Exchange Commission will soon go after how Wall Street investment advisors offer cryptocurrency custody to their clients.
In recent days, the SEC has been busy dealing with Paxos Trust, the issuer of Binance USD Stablecoins - they believe this is issued as an unregistered security. Paxos said it would be prepared to "aggressively litigate" if necessary.
