SEC to Launch New Rules Targeting Crypto Firms Running as “Qualified Custodians”

The United States Securities and Exchange Commission (SEC), an independent agency of the United States federal government, is reportedly planning to propose new rule changes targeting crypto firms operating as “qualified custodians.”

According to the Bloomberg report shared on February 14th, the news was revealed by a person familiar with the matter.

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In a nutshell, SEC plans to make it harder for crypto firms to hold customers' digital assets and call themselves “qualified custodians.” If this rule comes into effect, it would create additional barriers for hedge funds, private equity firms, and pension funds to work with crypto-related firms.

It is believed that on February 15th, a five-member Securities and Exchange Commission panel will vote on the matter. If a majority of panel members vote in favor of the initiative, the proposal will proceed to the next stage and will be voted on by the whole SEC.

It is worth noting that if the proposal receives a green light from a five-member panel and the whole SEC, the rule changes will be revised and altered based on the feedback from the community members.

If SEC agrees to the proposal, some crypto-related firms may have to move their customers' crypto holdings into different platforms. On top of that, the partners of crypto-related firms would become subject to “surprise audits” or other procedures.

The US Securities and Exchange Commission is tightening its grip on the crypto industry. On February 12th, the news broke that the US SEC was planning to sue stablecoin issuer Paxos. The regulator has sent Paxos a Wells Notice claiming that Paxos violated investor protection laws with Binance USD (BUSD) token, as it is an unregistered security.

On February 13th, Paxos responded to the SEC’s allegations, claiming that it “categorically disagrees” that BUSD is security and said it is prepared “to vigorously litigate if necessary.”