The SEC’s proposed custody rule change, which might permit the regulatory physique to supervise all belongings below adviser supervision, has confronted opposition from Coinbase, Andreessen Horowitz (a16z), and the Blockchain Affiliation. Every group submitted a 20-page letter outlining considerations and potential points with the proposal.
Coinbase’s Stance
Coinbase expressed in its letter that it could assist the proposal if the SEC supplied employees steerage. The corporate pushed for state-regulated belief corporations to proceed being acknowledged as certified custodians, arguing that state monetary regulators are extra conscious of technological and financial adjustments, which promotes competitors, effectivity, and investor safety.
The trade additionally took challenge with the SEC’s crackdown on registered funding advisers (RIAs), requiring them to have possession of shopper trades always, which Coinbase sees as a restriction on crypto asset buying and selling that doesn’t account for the advantages of pre-funding transactions like a real-time settlement.
Coinbase is at present in a authorized battle with the SEC over the definition of securities, and the corporate has sued the SEC to demand regulatory readability on crypto.
Andreessen Horowitz’s considerations
A16z referred to as for the creation of a “broad and strong regime for the self-custody of crypto and different belongings by RIAs.” For the enterprise capital agency to assist the proposed rule, the SEC should tackle severe considerations and make exceptions for crypto belongings.
The agency questioned whether or not the SEC has thought of the implications of the Safeguarding Rule for crypto belongings with participatory options like staking or voting. A16z additionally argued that stopping RIAs from buying and selling crypto belongings on centralized platforms would deprive purchasers of essentially the most liquid buying and selling venues and make it tough for RIAs to satisfy their fiduciary obligation of greatest execution.
To make the proposed rule work for crypto, a16z believes a self-custodial exception should cowl all belongings for which no appropriate certified custodian could be discovered and permit RIAs to self-custody crypto belongings with out violating the Safeguarding Rule.
Blockchain Affiliation’s critique
The Blockchain Affiliation claimed that the proposed rule’s try to limit digital asset funding exercise is inconsistent with the principles-based method set out by Congress within the Advisers Act. The necessity for “certified custodians” would stop digital asset-native custodians from persevering with to supply custodial providers, lowering protections for advisory purchasers.
The Affiliation argued that the SEC doesn’t acknowledge the technological distinctions between digital belongings and different asset lessons. It additionally claimed that the SEC exceeds the authority it obtained from Dodd-Frank’s Advisers Act amendments with the present framework of the proposed rule. The rule would cut back protections for purchasers investing in digital belongings as a result of segregation requirement, as utilized to state-chartered banks, which might impose a regulatory regime based mostly on ambiguous state legislation rules.
Each the Blockchain Affiliation and Coinbase voiced considerations about feedback round modifying the definition of state-chartered monetary establishments.
In accordance with the SEC’s web site, quite a few different corporations and basic counsels have submitted feedback on the proposed rule. Public feedback have been open for 60 days following the publication of the proposed launch within the Federal Register.