Bitcoin and cryptos (still) in danger: the SEC tightens the noose around the exchanges

An SEC that does not do half measures – There Securities and Exchange Commission (DRY) wants to regulate more strictly the activities of third-party custodians. A new proposition could disrupt the way crypto platforms work. These should comply with new regulatory requirements.

Crypto platforms in the sights of the SEC

In a communicated on February 15, the chairman of the SEC, Gary Genslerannounced its support for a proposal. This aims to increase the protection that qualified custodians offer to investors’ assets, which are monitored by registered investment advisers.

Gary Gensler points out that the new rules that would apply concern “all assets”, including cryptocurrencies in general. These new provisions require, in particular, that advisers separate correctly the assets of each investor and require qualified custodians to “reasonable guarantees” who prove the latter do the same.

The new measures also require qualified advisers and depositaries to enter into written agreements. These documents will require custodians to submit to a annual evaluation conducted by accountants. The agreement should also provide that qualified custodians provide account statements and other documents upon request.

This strict segregation of assets and other obligations in terms of financial transparency would better protect investors in the event of bankruptcy of the adviser or custodian.

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Banished crypto platforms, deprived of billions of dollars

In the announcement, the SEC Chairman made a point of criticize crypto platforms that claim keep investors’ cryptos, but which would not not in reality qualified agents. Gary Gensler criticizes them in particular for mix assets of their customers with theirs. He recalled the case of the recent bankruptcies of crypto platforms which claimed many victims.

Assets of investors that have not been properly managed are then “often become the property of the bankrupt company”. Injured customers must wait for the court’s decisions to be able to recover their assets.

Given the way these crypto platforms manage their clients’ assets, Gary Gensler points out that investment advisers can not use their services as qualified depositaries.

This proposal regulatory has already received four votes in favor And a vote against members of the SEC. If it gets official approval from the agency, crypto exchanges will have to mobilize the necessary resources to change the way they operate to avoid losing the big clients that are investment advisers.

Gary Gensler has also specified the Financial issuesindicating that these investment advisers recommend investors or funds – hedge funds, pension funds, etc. – that manage billions of dollars in assets.

An SEC hostile to cryptocurrencies and too intrusive

Not all members of the SEC share the position of SEC Chairman. The commissioner Hester Peirce To underline the harmful effects of these “such radical statements”. Indeed, these would deter investment advisers from recommending cryptocurrencies to their clients.

Hester Peirce also pointed out that through this proposal, the agency interferes in relationships commercial and private between customers and depositaries. However, the latter agree, by mutual agreement, on the conditions relating to the protection offered to the deposited assets and the fees. These are, moreover, already fixed on the basis of a “mutually acceptable distribution of risks and responsibilities”.

In and of themselves, requirements to separate client assets from those of crypto platforms are not a bad thing. Quite the contrary! Such provisions make it possible toavoid that third-party custodians use their clients’ assets for their own interests. Nevertheless, the SEC, in particular its chairman, should remain neutral in their speeches and refrain from attacking the new class of assets that are cryptocurrencies. The implementation of new measures on custody of cryptocurrencies should also be done gradually, with the aim of supporting the crypto industry, not with the aim of sanctioning it.

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