The crypto space is worried because of recent enforcement actions by US regulators on several companies. One of the most recent reports is about the company Paxos Trust, the issuer of the stablecoin Binance USD.
The United States Securities and Exchange Commission (SEC) announced plans to prosecute blockchain companies. Also, the New York Department of Financial Services (NYDFS) ordered Paxos to stop issuing BUSD tokens.
In a recent development, the SEC is now targeting crypto companies, even those with operational licenses. Regulators are working on a new proposal this week to define the types of products and services digital asset companies will offer.
SEC Panel To Select Rule Change Regarding Crypto Company Custodial Services
Recently, Bloomberg reported that the SEC plans to choose a new proposal that will affect the operation of all crypto-related companies that are licensed as custodians. These rules could make it difficult for crypto companies to hold digital assets on behalf of their clients.
According to reports, the regulator is set to vote on Wednesday, February 15, on changes to the rules on digital assets company services. After that, the 5-member SEC panel will begin the voting process to determine the next stage for the proposal.
The voting process requires a majority of the panel, which is 3 out of 5, to vote in favor of the proposal. Then, other members of the SEC will formally complete the process by reviewing the proposal. Once approved, the proposal will be revised with all necessary suggestions also reported.
If the commission adopts the new rules, it will have a major impact on the custodian’s main clients, including private equity firms, pension funds, hedge funds, and others.
In the past few years, the SEC discussed several requirements for crypto companies to qualify as digital custodians. However, no one could talk about the regulator’s proposed changes.
In the report, Bloomberg notes that some crypto companies may be looking for alternative places to transfer ownership of their clients’ digital assets. Also, the regulator can conduct some surprise audits on financial companies regarding custodial relationships at any time.
SEC Increases Attention On Crypto Companies
After the sudden bankruptcy of the FTX crypto exchange, the SEC is focusing more on digital assets and Environmental, Social, and Governance (ESG) funds. Regulators have previously warned issuers to disclose the risk of exposure in the crypto market to investors.
According to a reports CNBC last week, US regulators committed to follow the annual list released on Tuesday, February 7. The list includes a road map for operations and also shows the changing landscape and some of the risks in the securities market.
On February 8, SEC Chairman Gary Gensler tweeted about releasing the agency’s examination priorities for 2023. The 2023 priorities cover several areas, including RIA for private funds, emerging technologies, crypto assets, new investment advisors and investment company rules, and more.
Featured image from Pixabay, chart from TradingView.com