The SEC is on the verge of scrapping the Biden administration‘s proposed crypto custody rule, and honestly, it’s about time.
Initially introduced by former SEC Chair Gary Gensler in February 2023, the rule aimed to tighten security for client assets by mandating that investment advisers use qualified custodians for cryptocurrencies. Sounds great in theory, right? But the backlash from the industry has been nothing short of explosive.
Acting SEC Chair Mark Uyeda has hit the pause button, exploring alternatives to this sweeping rule, including its outright withdrawal. Why the sudden change of heart? Well, significant criticism has poured in from all corners—Congressional Republicans, crypto firms, and traditional finance institutions alike.
Critics argue that the rule would scare banks away from working with crypto companies. Not exactly a winning strategy for innovation. Even Commissioner Hester Peirce raised her eyebrows, worried it would diminish the pool of qualified custodians available.
The proposed rule risks pushing banks away from crypto, stifling innovation and limiting qualified custodians.
As the SEC staff collaborates with the crypto task force, it’s clear that they are rethinking their approach. This isn’t just a casual stroll down regulatory lane; it’s a significant pivot from the stricter stance taken under the Trump administration.
It’s almost like they’re saying, “You know what? Maybe we went a bit too far with this one.”
The proposed rule would have required crypto assets to be held by banks or broker-dealers, which, let’s be real, would have complicated things unnecessarily. As investment advisers grappled with compliance feasibility, the potential withdrawal is a welcome relief, hinting at a more lenient regulatory landscape for digital assets. This shift could mean more room for innovation and less red tape for investment advisers.
In a world where regulatory changes often feel like a wet blanket, the SEC’s reconsideration of the crypto custody rule might just ignite a spark of optimism in the crypto sector. Who knew?
