SEC to Vote on New Crypto Custody Rules: What This Means for Investors

• The US Securities and Exchange Commission (SEC) is planning to propose new regulations this week that could affect the services crypto firms offer their clients.
• A five-member SEC panel will vote on the proposal on February 15th, with a majority of three votes required for the proposal to proceed.
• If approved, the SEC’s proposal would make it difficult for crypto firms to operate as “qualified custodians” and could lead entities like hedge funds, private equity firms, and pension funds to move their clients‘ holdings elsewhere.

US SEC to Vote on New Rule Overseeing Crypto Firms as Qualified Custodians

The US Securities and Exchange Commission (SEC) plans to propose new regulations this week that could affect the services crypto firms offer their clients. A five-member SEC panel will vote on the proposal on Feb. 15th, requiring a majority of three votes for it to proceed.

What Would Change?

If approved, the SEC’s proposal would make it difficult for crypto firms to operate as “qualified custodians” and could lead entities like hedge funds, private equity firms, and pension funds to move their clients‘ holdings elsewhere. In 2020, an SEC staff said that they were grappling with the question of who could be a qualified custodian of crypto assets and requested feedback from members of the public.

Why Does This Matter?

This proposed rule change aligns with the SEC’s plan to reduce risks posed by cryptocurrencies towards the broader financial system following spectacular failures in 2022 such as FTX exchange and Voyager Digital brokerages. If finalized after going through public participation processes, these rules would take effect immediately following another vote by all members of the commission.

Timeline

The five-member panel will be voting on this proposal Wednesday February 14th at 9:55am EST before it proceeds out for public feedback if passed through voting. Afterward, if accepted all members must then vote again in order for these rules become effective after being amended based off provided feedback from citizens or organizations involved in cryptocurrency related activities or investments

Conclusion

The proposed changes made by U.S Securities & Exchange Commission may pose difficulty for certain cryptocurrency related activities however this may also ensure safer investments while reducing risk posed against other financial institutions due to past failures seen throughout 2021 & 2022 among others such as FTX & Voyager Digital brokers respectively