According to newly filed letters, a proposal by the US Securities and Exchange Commission to tighten laws regarding crypto custody has been faced with pushback from at least two industry proponents.
The Blockchain Association sent a letter to the Securities and Exchange Commission (SEC) on May 8 — the deadline for comments on the plan — opposing the SEC’s proposal to revise its custody rule. Web3 venture capital fund Andreessen Horowitz (a16z) delivered a similar letter three days earlier.
Marisa Tashman Coppel, a policy lawyer at the Association, tweeted on May 8 that the rule would “dramatically curtail investment in digital assets” and that it is “illegal” in its current form against the same day, a16z’s general counsel Miles Jennings tweeted that the company “did not mince words” in its letter, calling the idea a “misguided and transparent attempt to wage war on crypto.”
The Blockchain Association cited over a dozen separate points in its letter to reject the SEC’s proposal. Among other things, it claimed that the rule violates the SEC’s power, would prevent advisors from trading with cryptocurrency exchanges, and would put investors’ money at greater danger.
A16z made similar reasons in its letter, but focused on the implications for registered investment advisers, particularly that advisors would be barred from employing cryptocurrency, and the rules could violate the SEC’s duty of care to such businesses.
It called the ban on advisors trading bitcoin on centralized exchanges “illegal, unworkable, and dangerous.”
The February plan, which has yet to be authorized by the SEC, would impose stricter regulations on financial advisors in the custody of assets, including cryptocurrency. Firms must appropriately segregate assets, and custodians must undergo annual audits by public accountants, among other transparency requirements.
With the ruling, Gensler has explicitly targeted cryptocurrency exchanges, claiming that some crypto trading platforms offering custody services are not actually “qualified custodians.”
Even within the SEC, there was opposition to the concept. Commissioner Hester Pierce questioned the rule’s “workability and breadth” as well as its apparent targeting of cryptocurrency and cryptocurrency-related businesses.
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