U.S. Securities and Exchange Commission (SEC) has to bear a lot of stress from digital currency firms for delaying the approval of the proposals on Crypto Custodian. In the last few months, SEC has received many applications from the crypto firms for broker-dealer and exchange-traded funds.
Both FINRA and SEC have issued a joint statement to address the problems for the approval of crypto custodian. On 8th July the report was released officially by both government organization of the US.
As per the statement, both the organizations are yet to discover the key areas of customer protection that crypto custodian can comply with SEC. For the customer safety rule, the broker-dealer should separate the customer asset from the firm’s asset for customer safety. This, in turn, ensures that customer assets can give back to them if the broker-dealer flops. The questions are also arising whether to treat these assets under the SIPA of 1970.
SEC has been continuously denying the crypto custodian for a more extended period now. They have released the joint statement to help the public to gain a proper understanding of the concerns why the proposals are getting delayed.
In the US, each broker-dealer is regulated and registered to make it easier for them to purchase securities for clients and themselves. Some companies of the country are interested in using digital assets as securities to create marketing to the institutional customer easier. They cannot directly buy these assets or hold them.
In the statement, it is told that broker can easily prove that they have the private key to a wallet, but it will be difficult to determine that no other entity possess the same and can transfer the assets without broker-dealer consent. So as per the statement, the aforementioned key is not sufficient to prove the possession of a wallet.
The statement also touches the problem of registering the non-custodial services like OTC platform and broker-dealer in detail in addition to the custodial services. It also expresses its concern about bookkeeping and liquidation via SIPA.
In the recent past, both SEC and FINRA had conducted a meeting in Chicago on broker-dealer to address the crypto related hot topics and regulatory framework. The meeting also covered topics like digital assets and cyber securities.