Just recently, the Securities and Exchange Commission (SEC), voted to approve new amendments that would affect crypto asset custody rules in the United States. Commissioner Hester Peirce (“Crypto Mom”) was not pleased.
Peirce fears that the proposed rules could make crypto investors more susceptible to fraud and theft, which is contrary to their intentions.
Crypto Mom’s Criticisms
According to the SEC, the rule change would alter the Commission’s custody rule in order to “amend certain related recording and reporting obligations”, with the goal of “enhancement protections customer assets managed registered investment advisers.” Press release On Wednesday
These amendments would “expand” the rules’ scope to include assets other than client funds and securities. They also cover all assets managed by an investment advisor, such as cryptocurrencies.
You can find out more at Separate statementGary Gensler, chairman of the SEC, stated that investment advisors would have to keep crypto users’ with “qualified custodians.”
Gensler stated, “Beware: Even if a cryptocurrency company claims they have custody of your assets, it is not the same thing as qualified custody.”
Peirce was the only commissioner to object. She believes that the rule will increase the risks for crypto holders because it has caused the number qualified custodians shrink. She stated that such rules will force investors to take their assets away from custodians who have safeguarding procedures in place.
Peirce also criticized the assertion made by the SEC that “most crypto assets will be funds or crypto-asset securities covered under the current rule.” Despite Gensler’s claims, Peirce believes that it is false that most crypto assets can be considered securities.
She added that “More generally the broad “just about any crypto asset is considered a security” statements seem to be part a broader strategy to wish complete jurisdiction over crypto into existence.”
The SEC’s Jurisdiction
Since last Thursday’s commission meeting, questions about crypto authority have risen. Charges laid Kraken was accused of not having registered its staking as-a-service product in a securities offering. Crypto Mom objected also to the enforcement action as she believed that Kraken had not been given a viable registration pathway.
Paxos received a Wells Notice from the SEC the following week. It threatened to sue them for allegedly selling unregistered securities in the form BUSD.
Coinbase issued a statement saying that neither Kraken’s service nor stablecoins are securities under the Howey Test.