The United States Securities and Exchange Commission (SEC) is reportedly planning to propose new rule changes this week that could affect the services that crypto firms can offer to their customers.
According to a February 14 report by Bloomberg quoting “Individuals familiar with the matter,” the securities regulator is working on a draft proposal that would make it more difficult for crypto firms to hold digital assets on behalf of their clients as “qualified custodians.”
This, in turn, may affect the many hedge funds, private equity firms, and pension funds that work alongside such crypto firms.
According to those cited, a panel of five members of the SEC will vote on February 15 if the proposal goes to the next stage.
It will take a majority vote, 3 votes out of 5, for the rest of the SEC to officially vote on the proposal. If approved, the proposal will be modified with comments where necessary.
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While the SEC has deliberated on what should be required to be a qualified cryptocurrency custodian since March 2019, people familiar with the matter said it’s unclear what specific changes the US financial watchdog is seeking.
If finalized, Bloomberg explained that some crypto firms might have to move their clients’ digital asset holdings elsewhere.
The report added that these financial institutions could be subject to “surprise audits” related to their custodial relationships or other ramifications.
Related: SEC Chairman Issues Warning to Crypto Firms After Kraken Staking Action
News of Wednesday’s ballot proposal arrives on January 26. A Reuters report suggested that the SEC would soon go after Wall Street investment advisers over how they have offered custody of cryptocurrencies to their clients.
In recent days, the SEC has been very busy with Paxos Trust, the issuer of Binance USD (BUSD) stablecoin, which they believe issued as an unregistered security.
Paxos said they will be prepared to “vigorously litigate” if necessary.
