SEC Commissioner Hester Peirce isn’t alone in her perception that the SEC’s proposed custody rule would restrict entry to crypto. 

The Blockchain Affiliation filed a remark letter in response to the SEC’s custody rule on Monday, Could 8. 

The letter claims that the proposed guidelines’ “necessities for certified custodians particularly would discourage digital asset-native custodians from persevering with to supply custodial providers, which would cut back, reasonably than enhance, protections for advisory shoppers.”

In February, the SEC proposed rule adjustments to its custody rule. The adjustments would broaden the blanket of the rule past shopper funds or securities and would cowl shopper belongings beneath an funding adviser. 

“The proposed rule would additionally improve protections for sure securities and bodily belongings that can’t be maintained by a certified custodian,” the SEC mentioned

Nevertheless, the necessity for “certified custodians” would forestall “digital asset-native custodians from persevering with to supply custodial providers, which would cut back, reasonably than enhance, protections for advisory shoppers,” the Affiliation claims.

It believes that the rule, because it stands, wants revisions to “adequately account” for digital asset options. It advised that the SEC “allow advisers to make the most of buying and selling platforms which can be affiliated with certified custodians, topic to sure heightened controls.” 

“Along with mandating an inside management report, the Proposed Rule may require certified custodians with affiliated trade platforms to bear extra frequent shock examinations, periodic impartial cybersecurity audits, and periodic SEC reporting obligations regarding threat assessments, incident responses, and remediation,” the letter continued. 

The Affiliation additionally believes that the rule is “inconsistent” with the regulatory framework established beneath the Advisers Act. 

The Act, established in 1940, was enacted to arrange laws that might forestall or finish the abuse of securities.

And it wouldn’t be a letter to the SEC if securities weren’t talked about. 

The SEC’s statements that digital belongings are “presently” securities “beneath the Custody Rule is at odds with the Administrative Process Act,” the letter states.

It continues: “This assertion represents a departure from previous interpretive positions and imposes a binding norm on market members that has not been subjected to a correct discover and remark rulemaking in conformance with the APA.”

The SEC has been wrestling with the crypto business over the definition of safety. The fee has charged a number of crypto corporations — together with Bittrex and Coinbase — with lawsuits, alleging that unregistered securities had been among the many choices.

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