The SEC’s upcoming crypto roundtable on custody occurs Friday, featuring senior officials and industry leaders. Discussions will focus on existing regulatory gaps, with an emphasis on how custody rules affect cryptocurrency management. Critics argue current SEC regulations are inadequate for the needs of digital asset firms, prompting calls for reform. This is the second of four roundtables addressing crypto regulations.
Tomorrow, the U.S. Securities and Exchange Commission (SEC) kicks off its second roundtable focused on crucial custody rules for crypto assets. This is part of a broader four-part series the SEC’s Crypto Task Force is hosting, aimed at tackling various regulatory issues that have been raised within the digital asset sector. Notably, this session will involve senior SEC officials, legal experts, and top executives representing prominent crypto firms, who will all delve into important regulatory matters.
Among the notable SEC officials participating is the newly appointed Chairman Paul S. Atkins. He, along with others, is expected to address the current state of compliance regarding crypto custody. This discussion comes amid ongoing concerns over the existing SEC regulations, which many in the industry feel don’t accurately reflect the intricacies of the modern digital asset ecosystem. As it stands, the challenges around crypto custody continue to create tension in U.S. financial regulation.
The upcoming roundtable will feature two main panels. The first will address “Custody Through Broker-Dealers and Beyond,” while the second will focus on “Investment Adviser and Investment Company Custody.” Under the current SEC framework, investment advisers are obligated to secure client funds and digital assets through qualified custodians, typically banks or broker-dealers. Yet, the reality is that very few firms can meet these stringent requirements regarding crypto assets, given its need for unique technologies and the capacity for continuous trading.
A proposal from the SEC earlier in 2023 aimed to modernise these rules but was met with pushback for not providing adequate solutions that cater to the needs of crypto-native firms. Confirmed participants for this roundtable include representatives from firms such as Fireblocks, Anchorage Digital Bank, and Fidelity Digital Assets, to name a few. They’ll join forces with various legal and academic figures, many of whom have already expressed critical views on the SEC’s current custody framework.
Neel Maitra from Dechert LLP has called custody “the single greatest question facing crypto market participants,” highlighting the need for a balance between security and access for investors. Another participant, Justin Browder from Simpson Thacher, reflected last year on the SEC’s policies, asserting that they force advisers to choose between delivering client service and adhering to compliance. As it stands, the pool of qualified custodians for crypto-assets remains exceedingly small.
This roundtable follows an earlier session focused on crypto trading held on April 11, 2023. Looking ahead, two more gatherings are planned, one on tokenization on May 12 and another that tackles decentralized finance on June 6.
