The United States Securities and Exchange Commission (SEC) is reportedly planning to propose new rule changes this week, and this could impact what services crypto firms can offer their clients.
According to an article published on Tuesday by a renowned media house, people familiar with the matter revealed that the SEC is working on drafting a proposal that would make it difficult for crypto firms to hold digital assets on their client’s behalf as “qualified custodians.”
In addition, the upcoming proposal might affect many hedge funds, private equity firms, and pension funds that work alongside such crypto firms.
Sources reveal that a five-member panel of the regulator is scheduled to vote on Wednesday on whether the proposal should proceed to the next stage. In order to conclude, a majority vote, i.e., three out of five, will be needed.
If a majority is secured, the proposal will be forwarded to the rest of the SEC officially. In case it is approved, the proposal will be amended with the necessary feedback as suggested.
While the regulator has deliberated on what should be required to be a qualified custodian of cryptocurrencies since March 2019, people familiar with the topic suggested that it isn’t clear what specific changes the securities regulator desires.
The news article mentions that some crypto firms might have to move their customer’s digital asset holdings elsewhere. It also says that these financial institutions might be subject to “surprise audits” related to their custodian relationships or other ramifications.
Notably, the scheduled vote on the proposal follows up the news from late January wherein the regulator was suspected to be soon approaching the Wall Street investment advisers over how they have offered crypto custody to their clients.
Recently, the SEC has been working incessantly in the crypto domain. It was reported to execute the maximum number of enforcement actions against crypto entities in 2022. Recently, the regulator has also been diverting significant attention toward Paxos, who is the issuer of the stablecoin BUSD. The regulator has alleged the institution of selling unregistered securities.