SEC Proposal Could Bar Investment Advisers From Keeping Assets at Crypto Firms

The U.S. Securities and Exchange Commission (SEC) proposed a rule that would effectively require registered investment advisors (RIA) to go outside the crypto industry for storing digital assets, according to its first formal policy push that leans heavily into the cryptocurrency sector. From a report: The rule, approved in a 4-1 vote by the SEC on Wednesday, would expand the agency's existing regulations that say an investment adviser needs to keep customers' money and securities with a "qualified custodian." The new version, if approved, would grow that safeguarding requirement to any assets that investment advisers are entrusted with -- including crypto.

Right now, crypto trading and lending platforms routinely offer custody for crypto customers, but they're not "qualified custodians" under this rule. An appropriate custodian under SEC's regulations would generally mean a chartered bank or trust company, a broker-dealer registered with the SEC or a futures commission merchant registered with the Commodity Futures Trading Commission (CFTC). While officials said the rule wasn't specific to crypto, the industry featured heavily in formal remarks previewing it. "Make no mistake: Based upon how crypto platforms generally operate, investment advisers cannot rely on them as qualified custodians," SEC Chair Gary Gensler said in a statement. "Though some crypto trading and lending platforms may claim to custody investors' crypto, that does not mean they are qualified custodians."

yet again

[blackomegax]

not your keys NOT YOUR COIN

Re:

[Powercntrl]

not your keys NOT YOUR COIN

Of course, the counterpoint to this is that if you're holding coin in your own wallet, you better be planning to HODL with all the consequences that entails. Usually the reason people keep their coins on an exchange is so that they can have a Stop-Loss Order set, which basically equates to an automatic panic sell to minimize losses, should the value of a coin plummet.

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[e065c8515d206cb0e190]

Oh you will hit a bid with a stop loss. It might not be a bid you like, but there will be one.

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[Shaitan]

So your prediction is that this helps to stabilize the coin? Probably. I think leverage/derivatives are the bigger problem though and this also temporarily puts a damper on that.

This regulation doesn't stop much of anything though... nothing stops qualifying entities from running trade platforms and I think Coinbase at least would already qualify as a custodian under this rule.

A fool and his money

[Powercntrl]

If your investment advisor suggests putting your funds into cryptocurrency, I would suggest barring that investment advisor from access to your money.

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[Powercntrl]

If people followed my advice to invest in bitcoin back in 2013

Which is great investment advice if you have a time machine, otherwise it's not really relevant. As they say, "past performance is not indicative of future results".

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[Darinbob]

This is not a crypto thing though: if your investment advisor suggests putting money in any entity in the US which is _NOT_ certified, registered, or otherwise not monitored by SEC, then run away from that advisor as fast as you can. Crypto just happens to be current fad for unregulated massively high risk investment. The very fact that they avoid regulations means that they're high risk. Investment adivsors and banks should NEVER park customer money in anything dubious and outside the law. Anyone who s

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[e065c8515d206cb0e190]

If you're very wealthy, there is a case to be made that it doesn't hurt to put 1% in bitcoin, purely for the asymmetry. Sure, it can go to 0. But it could also go to 1 million. DISCLAIMER: I don't own crypto currently and haven't in 5 years.

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[Powercntrl]

If you're very wealthy, there is a case to be made that it doesn't hurt to put 1% in bitcoin, purely for the asymmetry.

If you're very wealthy, there's absolutely no harm in throwing some money at long shots. It's one of the reasons you have to be exceedingly bad with money to manage to go from riches to rags, as has been the case with some former celebrities.

But for the average working class American who expects most of their retirement portfolio to still be intact when they retire, cryptocurrency is a long shot which exposes an investor to significant risk. As they say, "don't invest what you can't afford to lose."

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[e065c8515d206cb0e190]

Absolutely. That's why I said wealthy, and 1% of wealth in crypto.

Is this SBF's get out of jail free card?

[mtm10]

I imagine the former CEO of FTX's lawyers might argue that "The SEC recognizes that cryptocurrency is not money, but is a speculative investment, and it is a incorrect for anyone to perceive exchanges holding assets in cryptocurrency as qualified custodians, such as a chartered bank or trust company or broker-dealer..."

He would still be exposed to laws regulating handling of non-financial speculative assets.

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[ttspttsp]

nah, SBF committed outright fraud. FTX's TOS explicitly said that customer assets are not touched, he stole them.

Why don't they just bar them from stealing?

[Bob_Who]

I know, I know. It's a stupid question.