The United States Securities and Exchange Commission (SEC) plans to propose new rules that would tighten the requirements for cryptocurrency companies to become qualified custodians for institutional fund managers.
Although the draft proposal will be presented on Wednesday, the affected area remains unclear, Bloomberg reportedciting people familiar with the matter.
Crypto companies will face scrutiny as qualified custodians
According to the report, the SEC intends to submit a draft proposal with rule changes that would make it more difficult for crypto companies to be qualified custodians for money managers.
The new rules would affect hedge funds, private equity firms, some venture capital firms and pension funds, as they are required to insure client assets with qualified custodians.
If approved, the affected entities will have to transfer the assets of their clients to other custodians. They may also undergo audits on their custodial relationships and other ramifications.
SEC Steps Up Crackdown on Crypto Firms
The SEC’s move would be the latest aimed at curbing the risks that cryptocurrencies could pose to the broader financial system. The agency has already taken an aggressive stance against the cryptocurrency sector after a long list of companies died last year, dragging down investor funds.
Such cases include cryptocurrency exchange FTX, whose bankruptcy sparked a contagion that led to the insolvency of other companies and the disclosure of the real state of client assets.
Although the litigation against the founder and executives of FTX is still in progressthe SEC has strengthened its resolve to examine the infant industry, as seen in its cases against cryptocurrency lenders. nexus and FiBlock. The regulator has insisted that most cryptocurrencies and offerings are classified as securities and must be registered to ensure proper supervision and disclosure.
In the meantime, before the proposal is made public, a majority of the five members of the SEC would have to approve it. The agency would then have to collect feedback, vote again, and finalize the rule before it goes into effect.
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This post US SEC to Scrutinize Crypto Firms Operating as Qualified Custodians in New Rule: Report
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