SEC Reconsiders Crypto Custody Rule Under Trump Administration
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The U.S. Securities and Exchange Commission (SEC) is reconsidering a proposal that would tighten rules on how investment advisers handle cryptocurrency. Acting SEC Chair Mark Uyeda announced that concerns from the financial industry have raised doubts about moving forward with the original plan. First introduced in 2023, the proposal would have required investment advisers to save crypto assets with a qualified custodian, with strict security measures.
This development is indicative of a more general shift in the SEC’s strategy under the Trump administration. However, the concept was initially introduced during Gary Gensler’s tenure as SEC chair. To this end, this rule is one of numerous financial regulations that Uyeda is currently checking, and it might have a big effect on both financial institutions and the crypto space.
Concerns About the Custody Rule
The goal of the planned custody rule was to expand the existing protections for all assets, including cryptocurrency monitored by financial advisers. Therefore, these assets had to be kept with reliable custodians, such as banks or broker-dealers. However, critics including the American Bankers Association were concerned that this might deter banks from collaborating with cryptocurrency companies, making it more difficult for them to function.
As it stands, the pushback from lawmakers, crypto companies, and traditional financial institutions made it difficult for the regulatory agency to move forward. Uyeda acknowledged these concerns at a financial conference in San Diego, suggesting that the SEC might need to adjust or withdraw the rule. His request for SEC staff to work with the crypto task force shows an effort to find a more unbiased solution.
SEC’s Changing Approach to Crypto
Currently, Uyeda’s decision to revisit the rule is part of a larger shift in SEC policies under the Trump administration. Last week, he directed the agency to reconsider a rule that could broaden the definition of an “exchange” to include decentralized crypto projects. This change could impact how crypto businesses are regulated.
Since the new administration took office, the SEC has taken several steps that favor the crypto industry. It has established a crypto task force, suspended lawsuits against significant cryptocurrency companies, and relaxed stringent accounting regulations. The task force’s first meeting, which will focus on clarifying the legal position of cryptocurrencies, is scheduled for this Friday. These steps imply that the SEC is taking a more pro-crypto position than it did during the previous administration.
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