According to recently filed letters, a proposal by the US securities regulator to tighten crypto custody rules has been met with opposition from at least two supporters of the industry.
On May 8 – the deadline for comments on the proposal – crypto industry advocacy body Blockchain Association filed its letter to the Securities and Exchange Commission (SEC) criticizing its proposal to change its custody rule. Three days earlier, Web3 venture capital fund Andreessen Horowitz (a16z) sent the same letter.
Marisa Tashman Coppel, political counsel at the group, tweeted on May 8 that the law “will significantly reduce investment in digital assets” and said that in its current form, the law is “a law that -not approved.”
On the same day, a16z General Counsel Miles Jennings tweeted his letter, saying that the company “doesn’t hesitate” and called the SEC’s proposal “a wrong and clear attempt to make war on cryptography”.
In its letter, the Blockchain Association offered more than a dozen different arguments to push back against the SEC. In other statements, he said that the law that controls the powers of the SEC, will prevent advisers from dealing with crypto exchanges, and leave investors’ assets at risk.
A16z presented a similar argument in its letter, but focused more on its impact on registered investment advisers, namely that advisers will be prevented from using crypto and that the rules could undermine the supervisory role that the SEC requires of these companies. He called the ban on advisers to be able to trade crypto on centralized exchanges “illegal, unethical and dangerous.”
Still awaiting SEC approval, the February proposal would impose stricter rules on investment advisers who handle assets, including crypto.
Companies will separate assets properly and managers will need to submit annual audits by public accountants among other transparency measures. Gensler has used the law to take aim at crypto exchanges, and said that some crypto trading platforms that offer custody services are not good “competent custodians.”
The plan also saw pushback from within the SEC. Commissioner Hester Pierce questioned the “applicability and breadth” of the law and what it looks like for crypto and crypto companies.
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