• The US House Financial Committee has expressed disapproval for the SEC’s proposed advisory clients custody rule.
  • Financial Services Committee Chair, Patrick McHenry, and colleagues accuse the SEC of exceeding its authority in its proposed rule.
  • The proposal would affect crypto market participants as they may struggle to find banks willing to hold their assets.
  • Blockchain Association, VC firm Andreessen Horowitz and Coinbase CLO are against the proposed rule.

United States Securities and Exchange Commission (SEC) has received disapproval in its proposed advisory clients' custody rule.

Also Read: ‘War on crypto’ – Newly filed letters lambast proposed SEC custody rules

SEC’s custody proposal receives disapproval rating

Based on recent developments, the House Financial Committee and six subcommittee chairs sent a letter to the secretary of the financial regulator Vanessa Countryman, expressing their concerns about the SEC’s custody proposal.

In the address, the Financial Services Committee Chair Patrick McHenry and his colleagues argue that the financial regulator was ignoring its mandate in its proposed rule, christening “the registered investment adviser (RIA) rule.”

Notably, the rule seeks to ensure that qualified custodians of client assets undergo tougher and more stringent rules.

Based on the letter, the proposed rule would affect even the assets outside the SEC's jurisdiction, including “art, cash, commodities, and nontraditional assets.” Further, it would impede “the jurisdiction of other regulators by imposing custody rules on entities that already have their custody practices regulated by another regulator.”

Moreover, the letter further claims that the proposal contravenes standard industry practice, adding that it would eventually prove expensive while undermining the most basic function of banks, to hold money.

Cognizant of the fact that the most affected would be digital asset market participants, the letter notes:

The Proposed Rule would have an outsized impact on digital asset market participants, as entrepreneurs and companies within the ecosystem already struggle to find banks willing to custody their assets.

Restrictions of the SEC’s proposed rules

Normally, even the digital asset market would resort to state-chartered banks and trusts whenever they want reliable banking services. Accordingly, the letter highlights that proposed rules have certain restrictions, including that qualified custodians to federally chartered entities must create complications for them and reduce competition.

Furthermore, the proposed regulation would interact with the regulator’s Staff Accounting Association Bulletin 121 to handicap the banking industry further.

The US House of Representatives Financial Services Committee joins other players in the crypto market who have expressed their reservations about the custody rules in the past. Among them are the Blockchain Association and venture capital firm Andreessen Horowitz. Others include Coinbase Chief Legal Officer, Paul Grewal, who drafted a letter to the SEC appealing for changes to the proposal.

Related: SEC proposes tougher rules as part of its crypto custody crackdown


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Three reasons why Chainlink could rally

Three reasons why Chainlink could rally

Chainlink has noted accumulation by large wallet investors for the past two weeks. Nearly $110 million in LINK has been withdrawn from exchanges in this time period. LINK sustained above $13 on Sunday, extending gains by nearly 1%. 

More Chainlink News

Ripple holds on to double-digit gains, highest in top 20 cryptocurrencies

Ripple holds on to double-digit gains, highest in top 20 cryptocurrencies

Ripple rallied over 19% in the past seven days per CoinGecko data. The altcoin broke past resistance at $0.50 on the one-year anniversary of Judge Analisa Torres’ XRP ruling. 

More Ripple News

Bitcoin breaks $60,000 as market anticipates re-election of pro-crypto former President Trump

Bitcoin breaks $60,000 as market anticipates re-election of pro-crypto former President Trump

Bitcoin extended gains post the shooting at the rally of US Presidential candidate Donald Trump. The former President is a pro-crypto candidate, and a report by Fortune shows that Trump’s chances of winning the race increased after the Saturday events.

More Bitcoin News

Ethereum ETF launch could push Ether to new all-time high, on one condition

Ethereum ETF launch could push Ether to new all-time high, on one condition

Ethereum (ETH) traders are watching two key events closely: the anticipated approval of the Spot Ether ETF and the activities of whales, the large wallet investors holding ETH. An analyst has predicted that the odds of Spot Ether ETF is 72.7% this week. 

More Ethereum News

Bitcoin: Investors wonder if BTC troubles are behind

Bitcoin: Investors wonder if BTC troubles are behind

Bitcoin (BTC) stabilized around the $57,000 mark this week, while the German Government persists in transferring Bitcoin to exchanges. Concurrently, US spot Bitcoin ETFs have recorded inflows.

Read full analysis

BTC

ETH

XRP