- The newly published SEC rules are meant to ensure institutional advisers don’t inappropriately use, lose, or abuse investors’ assets, including crypto.
- However, not everyone agrees with the SEC’s proposed investment rules, with some analysts citing favoritism to big players.
The fall of FTX and Alameda, which has been described as America’s largest corporate failure of the century, has led to increased regulatory scrutiny from the United States Securities and Exchange Commission.
The cryptocurrency crackdown in the United States has led to related firms seeking registration licenses in friendlier nations. For instance, Galaxy Digital Holdings, under chief executive officer Mike Novogratz has sought a registration license from the Securities Commission in the Bahamas.
Ripple Labs CEO Brad Garlinghouse has in the past indicated that the blockchain payment company would migrate to a crypto-friendly market like Dubai if the SEC wins the ongoing lawsuit. Nonetheless, Garry Gensler and the rest of the SEC commissioners are laser-focused on bringing sanity to an industry that wiped out over $100 billion of investors’ money in 2022.
Notably, the SEC charged the Kraken cryptocurrency exchange with selling unregistered securities through the staking program, which the latter agreed to stop with the project and remit a fine of $30 million.
Earlier this week, the New York State Department of Financial Services said it had directed Paxos Trust Co. to stop issuing Binance-backed BUSD stablecoins.
The culmination of increased crypto scrutiny has been observed by massive liquidations of altcoins and whale traders purchasing Bitcoin (BTC).
SEC’s new proposed investment rules
The United States SEC has published new rules detailing how financial advisers qualify as regulated assets custodians. The proposed regulations by the SEC would exercise the commission’s authority by broadening the application of the current investment adviser custody rule beyond client funds and securities to include any client’s assets – including cryptocurrency – in an investment adviser’s possession.
“I support this proposal because, in using important authorities Congress granted us after the financial crisis, it would help ensure that advisers don’t inappropriately use, lose, or abuse investors’ assets,” said SEC Chair Gary Gensler.
In particular, Congress gave us authority to expand the advisers’ custody rule to apply to all assets, not just funds or securities. Further, investors would benefit from the proposal’s changes to enhance the protections that qualified custodians provide. Thus, through this expanded custody rule, investors working with advisers would receive the time-tested protections that they deserve for all of their assets, including crypto assets, consistent with what Congress envisioned.
However, the newly SEC proposed rules have been said to raise the bar for more institutional investors to enter the crypto market. According to John E Deaton, founder of crypto-laws.us, the SEC will only soften the crypto rules after big players get the most significant share.
💯 true and it is 💯 intentional. You will see the SEC soften its approach to crypto only after legacy incumbent players have a larger slice of the action. https://t.co/SArQaz2xCm
— John E Deaton (@JohnEDeaton1) February 16, 2023
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Notably, the comment period on the SEC’s proposed rules will remain open for another 60 days following publication in the Federal Register.
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