• The US Securities and Exchange Commission (SEC) is reportedly probing registered investment advisers over how they’ve offered crypto custody to their clients.
• The SEC’s inquiry has been ongoing for months but accelerated after the collapse of the crypto exchange FTX.
• The SEC is looking into whether registered investment advisers have met the rules and regulations around the custody of client crypto assets.
The United States Securities and Exchange Commission (SEC) has been actively investigating the practices of traditional Wall Street investment advisers to ensure that the proper qualifications are met when offering digital asset custody to its clients. According to a report from Reuters, three sources with knowledge of the inquiry have revealed that the SEC has been conducting the investigation for several months, but it gained additional momentum following the collapse of the crypto exchange FTX.
The SEC is believed to be looking into whether registered investment advisers have met the rules and regulations set out in the Investment Advisers Act of 1940 for the custody of client crypto assets. By law, such firms are required to be “qualified” to offer these services and adhere to custodial safeguards. This development shows that the SEC is taking a more active role in monitoring the industry and financial institutions to prevent any future issues.
In addition to the inquiry, SEC Chairman Gary Gensler has been pushing for rules to protect investor interests in the crypto space. On January 24, 2023, Gensler tweeted that “Our Best Ex rule would help ensure that brokers have policies & procedures in place to uphold one of their most important obligations: to seek best execution when trading securities, whether equities, fixed income, options, crypto security tokens, or other securities.”
The SEC’s investigation is an important step in protecting the interests of investors and ensuring that the proper qualifications and safeguards are met for the custody of digital assets. The increasing scrutiny of Wall Street investment advisers is likely to have a positive impact on the industry, as it will ensure that investors are protected and that the crypto space is a safe and secure environment.