The SEC’s new proposal proposes to change the rules of qualified custodian or make it more difficult for hedge funds to cooperate with encryption companies

According to reports, according to people familiar with the matter, the new proposal of the United States Securities and Exchange Commission (SEC) proposes to change the rules of qualified custodians, making it more difficult for hedge funds, private equity companies and pension funds to cooperate with many encryption companies.

Interpretation of this information:

The United States Securities and Exchange Commission (SEC) has proposed a new rule that could potentially make it harder for hedge funds, private equity companies, and pension funds to partner with cryptocurrency companies. Reports suggest that the proposed change in the rules of qualified custodians may be the reason behind the SEC’s new proposal.

Qualified custodians are third-party service providers who safeguard customers’ assets such as cryptocurrencies, securities, and cash. At present, many crypto companies rely on these qualified custodians to manage their digital assets. However, with the proposed changes, it seems that the SEC aims to impose stricter regulations on third-party service providers.

The proposed rule seeks to increase the number of requirements for digital asset custodians to become qualified custodians. According to sources familiar with the matter, these requirements could prove to be costly for many crypto companies, making it difficult for them to do business with qualified custodians.

If the new proposal is adopted, digital asset custodians will have to meet additional requirements, including registration as an investment advisor, cybersecurity audits, and audited financial statements. The SEC aims to protect investors’ assets while also ensuring that there is transparency in the industry.

However, many in the crypto industry are concerned that the proposed changes could have the opposite effect. Regulatory requirements and compliance costs may become too much for some companies, leading to a concentration of power in the industry. This shift in power towards larger companies could limit innovation by smaller players in the industry.

In summary, the SEC’s proposed rule changes could have far-reaching consequences for the crypto industry. While it aims to increase transparency and protect investors’ assets, increased regulatory requirements and compliance costs could limit the number of qualified custodians available to smaller crypto companies. This could lead to a concentration of power in the industry and limit innovation.