tl;dr
The US Securities and Exchange Commission (SEC) is reconsidering a proposed rule imposing stricter custody requirements on investment advisers holding crypto and other assets. Acting SEC Chair Mark Uyeda stated that the agency is evaluating whether to amend or rescind the rule introduced under the p...
The US Securities and Exchange Commission (SEC) is reevaluating a proposed rule that would impose stricter custody requirements on investment advisers holding cryptocurrency and other assets. Acting SEC Chair Mark Uyeda announced that the agency is considering whether to amend or withdraw the rule, originally introduced during the prior administration.
The rule, which was initially championed by former SEC chair Gary Gensler, aimed to bolster investor protection by ensuring that investment advisers effectively safeguard client assets. One of its key provisions was to restrict qualified custodians to federally chartered entities, with Gensler emphasizing the need to prevent misuse or loss of assets. However, public feedback criticizing the rule's broad scope has prompted the SEC to reassess its approach.
Former Chair of the House Financial Services Committee Patrick McHenry expressed concerns about the rule's potential impact on cryptocurrency firms, highlighting that it could hinder federally chartered banks from providing custody solutions for assets from crypto-related companies.
Mark Uyeda emphasized that the SEC's regulatory focus is now centered on aligning measures with statutory authority while prioritizing cost efficiency and effectiveness. He also addressed another regulatory change requiring mutual funds and ETFs to report monthly portfolio holdings instead of quarterly, citing concerns about compliance costs and potential risks associated with AI-driven data analysis.
The SEC is exploring potential adjustments to this rule, including extending the compliance deadline and revising definitions for small entities to calibrate regulatory burdens appropriately. Uyeda underscored the continued scrutiny of safeguarding client assets, fund disclosures, and digital engagement practices, such as predictive data analytics, as key areas of regulatory attention.