- The US SEC has proposed new rules that require institutional advisers to properly manage investors‘ assets, including cryptocurrency.
- Galaxy Digital and Ripple Labs have both looked for registration licenses in friendlier nations due to the US crypto crackdown.
- The SEC’s investment rules are meant to prevent financial advisors from misusing, losing, or abusing clients‘ assets.
SEC Proposes New Investment Rules
The United States Securities and Exchange Commission (SEC) recently published new rules that detail how financial advisers must qualify as regulated asset custodians. The regulations aim to broaden the commission’s authority by applying the current investment adviser custody rule beyond client funds and securities to include any client’s assets—including cryptocurrency—in an investment adviser’s possession.
Why Are the Rules Being Proposed?
SEC Chair Gary Gensler believes that these proposed regulations would help ensure that financial advisors don’t inappropriately use, lose, or abuse investors‘ assets. This comes after FTX and Alameda’s major corporate failure in 2022 which led to increased regulatory scrutiny from the U.S. Additionally, The Kraken exchange was charged with selling unregistered securities through its staking program and had to pay a fine of $30 million as well as cease operations of the project. Finally, The NY State Department of Financial Services ordered Paxos Trust Co. to stop issuing Binance-backed BUSD stablecoins.
Where Else Are Crypto Companies Going?
Due to this increased crypto scrutiny in the United States some related firms have sought registration licenses in more friendly nations such as Galaxy Digital Holdings under CEO Mike Novogratz who sought a registration license from the Securities Commission in the Bahamas while Ripple Lab CEO Brad Garlinghouse has also indicated his company will move abroad if necessary.
What Has Been Observed?As a result of this heightened regulation there have been massive liquidations of altcoins accompanied by whale traders purchasing Bitcoin (BTC).
< h2 >Conclusion h2 > Ultimately these proposed regulations by the SEC are meant to protect investors from potential misuse or abuse of their funds by financial advisors so they can rest assured their money is safe while trading cryptocurrencies or other investments with certified professionals.