The United States Securities and Exchange Commission (SEC) is reportedly planning to propose new rule changes this week that could affect what services crypto companies can offer their clients.
According to a February 14 report from Bloomberg citing “people familiar with the matter,” securities regulators are working on a draft proposal that would make it difficult for crypto companies to hold digital assets for clients as “qualified custodians.”
This may affect many hedge funds, private equity firms and pension funds that work with these crypto companies.
According to the quoted, the five-member SEC panel will vote on February 15 whether the proposal proceeds to the next stage.
A majority vote – 3 votes out of 5 – will be required in order for the rest of the SEC to officially vote on the proposal. If approved, the proposal will be modified with feedback as needed.
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While the SEC has been considering what should be the custodian of cryptocurrencies since early March 2019, people familiar with the matter said it was unclear what specific changes the US financial watchdog wanted.
When it’s done, Bloomberg explains that some crypto companies will have to move ownership of their customers’ digital assets elsewhere.
The report added that these financial institutions may be subject to “surprise audits” related to custodial relationships or other consequences.
related: The SEC chair issued a warning to crypto companies after taking action on Kraken staking
News of Wednesday’s voting proposal comes on a Jan. 26 report from Reuters that suggested the SEC is coming after Wall Street investment advisers over how they gave crypto custody to clients.
In recent days, the SEC has had its hands full with Paxos Trust – the issuer of the stablecoin of Binance USD (BUSD) – which they believe has been issued as an unregistered security.
Paxos said it would be ready to “judge vigorously” if necessary.