According to a reputable news outlet that quoted three anonymous sources, the U.S. Securities and Exchange Commission (SEC) is looking into registered investment advisers to see if they are adhering to regulations regarding the custody of client cryptocurrency assets. Following the collapse of the cryptocurrency exchange FTX, the investigation accelerated, according to the report.
The SEC has been cautioning publicly traded firms that they should inform investors if they have a stake in the current crypto epidemic in the industry. The SEC questioned corporations if excessive withdrawals, redemptions, halting transactions, or withdrawals of crypto assets pose any hazards to their businesses.
The most recent development indicates that the market regulator is paying closer attention to where traditional finance and cryptocurrency interact. Since clients’ digital assets are often kept with a third party, the SEC is interested in learning more about what businesses did to evaluate custody for platforms like FTX.
A “qualified custodian” designation is one of the requirements for investment advisers to have custody of client funds or securities. According to the SEC, qualifying custodians can be banks, licensed broker-dealers, businesses that sell futures commissions, or specific foreign corporations.
Following clearance from New York’s financial regulator DFS in October, BNY Mellon, the country’s oldest bank, recently received regulatory approval to start custody of cryptocurrencies. A report claims that BNY Mellon would handle the private keys of a crypto asset owner in the same way that it handles bonds, stocks, and other types of assets for its clients.
For its custody solution, BNY Mellon intends to use software from Fireblocks. It also uses tools developed by Chainalysis, a blockchain monitoring firm, to look at digital assets housed in the bank’s vault— BNY Mellon has been investing in cryptocurrencies for a while now.