Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), has proposed expanding federal regulatory requirements to include cryptocurrencies, CNBC News reported.
The expansion would require cryptocurrency exchanges to go through a stricter registration process to be considered custodians and separate user assets from company assets. Gensler said:
“Our securities laws require exchanges to properly segregate client funds. Exchanges also should not operate broker-dealers or hedge funds and exchanges at the same time. The NYSE also does not have hedge funds and does not trade with customers.”
Currently, FDRs cover assets such as money or securities held by investment advisers. Under the current circumstances, investment advisors are required to deposit securities and funds belonging to their clients with federal or state banks.
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References to investment advisors include parties such as registered hedge funds and asset managers, which must register with the SEC if they manage more than $110 million in assets.
Gensler’s proposal would expand custody provisions to deposit any client’s assets, including crypto assets, under the same rules. Gensler acknowledged that applicable laws already cover a wide range of crypto assets, saying:
“Make no mistake: the current rules apply to a large number of cryptoassets. Investment advisors cannot consider them qualified custodians based on how cryptocurrency platforms typically operate. …
Through our proposed rules, investors will get the time-tested protections and qualified custodians they deserve. “
He also added that while most crypto assets are considered currencies or securities subject to applicable regulations, and crypto trading platforms are required to take custody of the cryptocurrencies used by a person, this does not make them “qualified” custodians.
Rather than segregate investors’ crypto assets, “these platforms mix those assets with their own cryptocurrencies or with other investors’ cryptocurrencies,” Gensler said. When those platforms fail, investors’ money It becomes the asset of the bankrupt company, which keeps investors “in line in bankruptcy court.”
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