SEC Chair Gensler: Crypto Exchanges May Not Be ‚Qualified Custodians‘
• SEC Chair Gary Gensler has cautioned that crypto exchanges may not be qualified custodians for investment advisers.
• Gensler emphasized the need for investment advisers to look to qualified custodians for storage of assets, including cryptocurrencies.
• Crypto trading and lending platforms are generally not considered safe under existing protection rules.
SEC Chair Warns on Crypto Exchange Qualifications
U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler recently warned that crypto exchanges may not be safe as qualified custodians for investment advisers during an Investor Advisory Committee meeting Thursday. He highlighted the recent proposed rule directing investment advisers to look towards qualified custodians for asset storage – including cryptocurrencies – which he believes makes „important enhancements“ to existing protection rules.
Crypto Exchanges Not Considered Safe
Gensler was adamant that crypto exchanges should not be considered safe under those guidelines, citing recent bankruptcies in the cryptocurrency sector where customers‘ property held on those platforms became part of the bankruptcy estate rather than returning directly to the customers. He said: “To be clear: Just because a crypto trading platform claims to be a qualified custodian doesn’t mean that it is.“
Risks Lurk for Others
While certain firms such as Coinbase and Anchorage Digital have stated they would be in compliance with the new SEC custody proposal, other firms still carry risks due to their lack of qualifications and understanding of applicable laws and regulations related to asset custody requirements.
Regulatory Uncertainty Inhibits Institutional Investment
The uncertainty surrounding regulations around cryptocurrency has limited institutional investor participation in the space, with many large investors waiting till regulatory clarity is achieved before entering into any kind of digital asset investments or custody services. Without proper implementation and understanding of these laws and regulations, investors can remain vulnerable when selecting a provider or platform for their digital asset holdings or transactions.
Conclusion
In conclusion, SEC Chairman Gary Gensler’s statement reiterates the importance of regulation in protecting investors from any potential risks associated with digital assets, while also ensuring that only qualified custodians are providing services related to these assets. With regulatory clarity set to increase over time, institutional investors will likely enter into this space more confidently knowing that their investments are secure through trusted service providers who meet certain criteria established by regulators such as the SEC.
