{"id":14245,"date":"2023-05-26T13:20:04","date_gmt":"2023-05-26T17:20:04","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/crypto\/us-lawmakers-urges-the-sec-to-include-state-regulated-custodians-in-new-rule\/"},"modified":"2023-05-26T13:20:05","modified_gmt":"2023-05-26T17:20:05","slug":"us-lawmakers-urges-the-sec-to-include-state-regulated-custodians-in-new-rule","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=14245","title":{"rendered":"US Lawmakers Urges the SEC To Include State-Regulated Custodians in New Rule"},"content":{"rendered":"
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Lawmakers urged a US regulator to not further limit certain financial stakeholders in its proposed rule tightening cryptocurrency custody requirements.\u00a0<\/p>\n

Republican Rep. Mike Flood of Nebraska and Democratic Rep. Ritchie Torres of New York sent a letter to the Securities and Exchange Commission last week, urging the regulator to \u201cmaintain a pathway to state-regulated custodians.\u201d<\/p>\n

The Securities and Exchange Commission rule was proposed in February and would require registered investment advisers to keep crypto with a qualified custodian, which would mandate certain requirements such as segregating investors\u2019 assets.\u00a0<\/p>\n

A qualified custodian<\/u> maintains client funds and can be entities like a bank or broker-dealer.<\/p>\n

The SEC asks in its proposal if the rule<\/u> should be narrowed to only certain banks, such as those subject to federal regulation.\u00a0<\/p>\n

\u201cGiven the very small number of digital asset custodians in the marketplace, excluding state-regulated institutions from becoming qualified custodians would lead to greater market concentration and adversely affect competition,\u201d Torres and Flood said.\u00a0<\/p>\n

Garnering pushback<\/h2>\n

The rule proposal has garnered some pushback since it was proposed on Feb. 15.\u00a0<\/p>\n

At the time SEC Chair Gary Gensler said<\/u> the proposal \u201cwould help ensure that advisers don\u2019t inappropriately use, lose, or abuse investors\u2019 assets.\u201d<\/p>\n

On the topic of crypto, Gensler said the rule already covers crypto.\u00a0<\/p>\n

\u201cThough some crypto trading and lending platforms may claim to custody investors\u2019 crypto, that does not mean they are qualified custodians,\u201d Gensler said.\u00a0<\/p>\n

Crypto exchange Coinbase pushed<\/u> back against the proposal earlier this month, arguing that some parts need to be changes.\u00a0<\/p>\n

The exchange generally agrees with the proposal, said Chief Legal Officer Paul Grewal on Twitter, while adding that Coinbase Custody Trust Company will remain a qualified custodian if the proposal is adopted as is.<\/p>\n

\u201cThat said, like other recent SEC actions, this proposal unnecessarily singles out crypto and makes inappropriate assumptions about custodial practices based on securities markets,\u201d Grewal tweeted.\u00a0<\/p>\n

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