According to reports, the US Securities and Exchange Commission (SEC) may propose new regulations this week that could impact the services offered by crypto companies to their clients.
The report claims that the securities regulator is working on a draft proposal that would make it more challenging for cryptocurrency companies to act as “qualified custodians” for clients’ digital assets.
The new regulations could affect hedge funds, private equity firms, and pension funds that associate with crypto businesses.
A five-member SEC panel will determine on February 15 whether the proposal advances to the next phase, and the proposal must receive three out of five votes for the rest of the SEC to approve it formally.
If it scales through the vote, the proposal will be modified accordingly, taking input into account. If adopted, the regulation might force institutional funds that have invested in cryptocurrencies to transfer the holdings of their clients. Additionally, these financial institutions might experience “surprise audits” connected to their custody arrangements or other repercussions.
People with knowledge of the situation noted that while the SEC has been considering the necessary criteria that must be met to be a qualified cryptocurrency custodian since March 2019, it is unclear what adjustments the American financial regulator is specifically requesting.
The SEC published its examination priorities for 2023 on February 7. According to Richard R. Best, director of the Division of Examinations, their priorities are based on a risk-based approach to examination selection that distributes their resources evenly among a diverse registrant base and reflects the changing environment and associated risks in the securities market.
Best noted that they would continue to concentrate on new concerns and regulations targeted at safeguarding small-scale investors as well as highlight compliance with new SEC requirements that apply to investment advisers and investment companies.
Best added:
“Our examination program continues moving forward and remains committed to furthering investor protection through high-quality examinations and staying abreast of the latest industry trends and emerging risks to investors and the markets.”
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