SEC proposes new rules for services provided by crypto firms
The crypto space is concerned because of the recent enforcement actions by US regulators on some firms. One of the latest reports is about the Paxos Trust company, the issuer of the Binance USD stablecoin.
The United States Securities and Exchange Commission (SEC) revealed its plans to sue the blockchain firm. The New York Department of Financial Services (NYDFS) also ordered Paxos to stop issuing BUSD tokens.
In a new development, the SEC is now targeting crypto companies, even those with operating licenses. The regulator is working on a new proposal this week to determine the type of products and services digital assets will offer.
SEC panel to vote on rule change for crypto firms’ custody services
Recently Bloomberg reported that the SEC plans to vote on a new proposal that would affect the operations of all crypto-related firms licensed as custodians. The rule could make it difficult for crypto companies to hold digital assets on behalf of their clients.
According to the report, the regulator will vote on Wednesday 15 February on rule changes regarding services to digital asset firms. After that, a 5-member SEC panel will initiate the voting process to determine the next phase for the proposal.
The voting process requires a majority of the panel, which is 3 out of 5, to vote in favor of the proposal. Then, other members of the SEC will officially complete the process by reviewing the proposal. Once approved, the proposal will be amended with all necessary feedback also reported.
If the Commission implements the new rule, it will have a major impact on the large clients of custodians, including private equity firms, pension funds, hedge funds and others.
Over the past few years, the SEC has discussed some requirements for a crypto firm to qualify as a digital custodian. However, no one could tell the possible changes the regulator is proposing.
In its report, Bloomberg noted that some crypto companies may find alternative places to move their customers’ digital assets. The regulator may also conduct some impromptu audits of the financial firms regarding their custody arrangements at any time.
SEC increases attention on crypto firms
After the sudden bankruptcy of the FTX crypto exchange, the SEC focused more on digital assets and environmental, social and governance (ESG) funds. The regulator has previously warned firms issuing securities to disclose the risk of exposure in the crypto market to investors.
According to a CNBC report last week, the US regulator is obliged to follow its annual list released on Tuesday 7 February. The list contains a road map for the business and also indicates the landscape changes and some of the risks in the securities market.
February 8, SEC Chairman Gary Gensler tweeted on releasing the agency’s examination priorities for 2023. The 2023 priorities cover several areas, including private fund RIAs, emerging technology, crypto-assets, new investment advisers and investment company rules, and others.
Featured image from Pixabay, chart from TradingView.com
