John Hughes
According to reports, the SEC is set to suggest rule modifications this week that may affect the types of services that crypto companies are allowed to provide to their customers.
Bloomberg reported on February 14th that individuals familiar with the matter revealed the securities regulator is developing a preliminary plan that would pose challenges for cryptocurrency companies seeking to act as qualified custodians for their clients' digital assets.
This could potentially impact various hedge funds, private equity firms, and pension funds that collaborate with these cryptocurrency companies.
It has been reported that on Feb. 15 a committee consisting of five individuals from the SEC will decide if the proposal should proceed to the following step.
At least three out of five members of the SEC will have to agree in order for the proposal to be put to an official vote. If the proposal is approved, it will be subject to any necessary changes or corrections based on responses.
Since March 2019, the SEC has been discussing the qualifications necessary to be a custodian for cryptocurrencies, but sources indicate that it is uncertain what particular alterations the American financial overseer is looking for.
Bloomberg stated that in the event of approval, some cryptocurrency companies may need to transfer their clients' digital asset possessions to another location.
According to the report, these financial institutions could potentially face unexpected audits pertaining to their custodial connections or other consequences.
The announcement of the vote proposal on Wednesday follows a Reuters report on January 26 indicating that the SEC is planning to investigate Wall Street investment advisors for their methods of providing cryptocurrency custody to their customers.
The SEC has been occupied with Paxos Trust, the creator of the Binance USD stablecoin, as they suspect it was distributed without proper registration as a security. Paxos has stated their willingness to aggressively pursue legal action if required.