Opponents of the SEC’s proposed shift to long-standing U.S. regulatory rules are growing.
in a letter This week, representatives of Bain Capital Crypto, Dragonfly Digital, Electric Capital, Haun Ventures and Ribbit Capital are the latest to voice opposition as they work to change the SEC’s regulations for registered investment advisors (RIAs).
Together, the five firms said they “manage more than $15 billion in assets, including crypto assets,” and spoke on behalf of institutional investors on the matter. Industry leaders, including the Blockchain Association, which lobbies for cryptocurrencies, have also recently weighed in on the SEC’s new rules.
“Protecting crypto assets is an important issue for our industry, but it must be properly balanced with genuine concerns about stifling technology and innovation,” the letter reads.
Recently, a deluge of cryptocurrency-related emails to the SEC criticized the lack of self-regulatory options for digital assets under the new rules. The letter, signed by the legal director, questioned the impact of the proposed rule change on cryptocurrency traders — especially their investors. According to executives, the lack of proper cryptocurrency self-regulation means that “investors and advisors are forced to disregard their fiduciary duties to the fund. Investors”.
The objection to SEC Rule 223-1 remains open for comment. It was first introduced by the regulator in February.
Qualified Supervisor
An important and controversial part of the SEC’s proposal is that it would require a qualified custodian (which must be identified by federal regulators) to be responsible for managing the custody of a basket of assets beyond current requirements. If the legislation goes into effect, the new SEC regulatory rules would expand safeguard requirements to client funds regulated by RIAs — even those securities that are not currently regulated by the SEC.
The updated guidelines appear poised to require crypto asset managers, including token-invested venture capital firms, to select qualified, U.S.-led custodians for their digital assets. To allow users to self-custody their cryptocurrencies, at least in some cases, the letter repeatedly raises the idea that handing over custody of proprietary cryptocurrencies to third-party custodians would increase custody costs and stifle innovation.
The letter also objected to the SEC’s proposal to require domestically registered cryptocurrency custodians to obtain FDIC approval to operate.
It gives several industry examples, including multi-signature wallets and cold storage held on-site by crypto investment firms. Crypto asset managers must hire an external audit firm for their investment and operations at least annually.
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According to Blockworks
