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SEC chair implies crypto exchanges may not be ‘qualified custodians’ as new rule is drafted

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United States Securities and Exchange Commission Chair Gary Gensler spoke at a meeting of the commission’s Investor Advisory Committee on March 2 on the topic of asset custody.

The committee has a proposed rule for investment advisers on safeguarding investor assets. It was the second statement Gensler has made on the proposed rule.

The first was in mid-February when the rule was first proposed.The current custody rule, dating to 2009, covers “a significant amount of crypto assets” and was designed to reduce the risk of advisers embarking on Ponzi schemes.

The new rule expands safeguards to all asset classes, including crypto assets that are not funds or securities, and would enhance protections provided by qualified custodians in light of new authorities granted by Congress in 2010, Gensler said.The proposed rule would also require written agreements between advisers and custodians, add requirements for foreign institutions serving as custodians and explicitly extend the safeguard rules to discretionary trading. Related: Galaxy acquires institutional crypto custody firm for $44M Investment advisers, he continued, cannot rely on crypto platforms to perform custodial functions.

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