The Blockchain Association said on May 8 that it objects to a change to the custody rule proposed by the US Securities and Exchange Commission (SEC).
Industry group objects to SEC proposal
Marisa Tashman Coppel, Policy Advisor for the Blockchain Association, warned that the SEC’s rule change could “drastically curtail” crypto investment.
She said on behalf of the Blockchain Association:
“The proposed rule deviates from the SEC’s obligation… to take an asset-neutral approach. …Instead of allowing flexibility…the proposed rule discourages custodians and advisors from offering services related to digital assets. “
Coppel explained that the proposal prevents investment advisors from engaging in self-custody of assets. She said the new rule could make acting as a qualified custodian prohibitively expensive and prevent advisors from providing the safest possible custody.
She added that the rule change could limit certain activities, such as staking and trading, if those services are not managed by a central intermediary or qualified custodian.
Coppel also suggested that digital assets enable new custody models, such as the decentralized custody model called multi-party computation (MPC). This model, used by Fireblocks, may not be allowed under the proposed rules, Coppel said.
Coppel added that rules around indemnification (ie loss coverage) and asset segregation could create problems for advisors. In addition, the fact that the proposed rule broadly applies to all assets without congressional authorization makes the proposal an “unlawful extension” of the SEC’s authority, Coppel concluded.
These statements are Coppel’s explanation of a longer letter published by the Blockchain Association itself, which represents more than 100 member companies.
The controversy began in February
Controversy surrounding the rule change first began on Feb. 15, when the SEC proposed the new rule. SEC Commissioner Hester Peirce quickly expressed her displeasure with the proposal, citing the potential impact on crypto as a concern.
However, several leading crypto platforms, including Coinbase, BitGo, Anchorage Digital, and Gemini, have endorsed the proposal. Those companies suggested that they already complied with the proposed rule change and would not be affected by the change.
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