The United States Securities and Exchange Commission (SEC) is facing opposition from prominent figures in the crypto industry over its proposal to tighten rules on crypto custody. Two notable proponents, the Blockchain Association and Andreessen Horowitz (a16z), have recently filed letters criticizing the SEC’s proposition.
On May 8, the Blockchain Association, an influential crypto industry advocacy group, submitted its response to the SEC expressing concerns about the proposed amendment to the custody rule. A policy lawyer at the association, Marisa Tashman Coppel, took to Twitter on the same day to express that the law would severely restrict investment in digital assets. She further argued that the current form of the rule is “unlawful.”
Similarly, a16z, a well-known Web3 venture capital fund, sent their letter to the SEC three days prior. The letter was released on Twitter by Miles Jennings, general counsel of a16z, who claimed that the company did not hold back and referred to the SEC plan as a “misguided and transparent attempt to wage war on crypto.”
The Blockchain Association’s letter to the SEC outlined numerous arguments against the proposed rule. It claimed that the rule exceeds the SEC’s authority, inhibits advisers from engaging in transactions with crypto exchanges, and poses a greater risk to investors’ assets.
A16z echoed similar concerns in its letter, emphasizing the potential impact on registered investment advisers. The fund asserted that advisors would be unable to utilize crypto under the proposed rules, potentially violating the duty of care mandated by the SEC for such firms. The prohibition on advisors trading crypto on centralized exchanges was described as “illegal, unworkable, and dangerous.”
The SEC’s proposal, which has yet to be approved, aims to introduce stricter regulations for investment advisers regarding asset custody, including cryptocurrencies. The proposed rules require firms to properly segregate assets, with custodians undergoing annual audits by public accountants, among other transparency measures.
SEC Chair Gary Gensler has specifically targeted crypto exchanges with this proposal, arguing that certain platforms offering custody services do not qualify as “qualified custodians.”
Also Read: Gary Gensler: A Butcher Of Crypto Investors and Innovations?
However, even within the SEC, there has been pushback against the proposal. Commissioner Hester Pierce expressed skepticism regarding the rule’s feasibility and broad scope, as well as its apparent targeting of crypto and crypto-related companies.
