The Securities and Exchange Commission is breaking the door to welcome crypto custody with a wide range of companies that have acquired state charters as trust companies, a list that includes Coinbase, Kraken and other high profile names trust affiliates.
The SEC’s investment management department issued a so-called non-action letter on Tuesday. This is a document that ensures that regulators do not pursue enforcement actions by those engaged in certain activities.
Such qualified custodian questions represented the battlefield of policy during the tenure of former SEC chairs Gary Gensler and Jay Clayton. The former led agents to introduce abandoned proposals after constraining the types of companies that could handle the cryptographic codes of regulated investment advisors. Gensler revealed that it is specifically intended to make exchanges like Coinbase into muscle.
However, the new SEC executives, especially Chairman Paul Atkins, are pursuing a campaign of encryption, and Atkins said establishing industry policies earlier this week is the agency’s number one priority (assigned by President Donald Trump of Crypto).
Tuesday’s non-action letter is not a formal agency rule, but it weighs enough to free businesses from short-term compliance concerns. Specifically, the document stated that the SEC “does not recommend enforcement action to the committee under the custody provisions for registered advisors or regulatory funds in order to treat state trust companies as “banks” in terms of crypto assets placement and maintenance.”
A previous discussion from Gensler was that crypto companies were not secure and were well regulated to ensure that registered investment advisors were qualifying without sufficient risk to maintain their clients’ assets.
“It has never been adopted, but the proposal has caused problems for investment advisors through the assertion that most crypto assets are likely to be funds or crypto securities subject to current regulations.
She argued that agents should “consider updating the rules governing registered investment advisors and acceptable custodians of investment companies,” adding that perhaps technically skilled companies should be allowed to custody the assets themselves.
However, Caroline Crenshaw, a Democrat commissioner who formed an alliance with Gensler on this point two years ago, issued a statement opposed the pointless treatment, saying the SEC is effectively treating crypto as separate from other financial sectors. And it ignores the efforts of businesses to pursue federal charters from the office of the currency secretary.
“Instead of creating an equal arena, we’ll leave investors and markets gambling in unnecessary games of 50 states’ regulated roulette. “It’s not wise for many reasons to implement a shift of this magnitude through no action relief without public comments or economic analysis. In particular, this is more common by this committee, but is likely to violate the Administrative Procedure Act.”
The SEC has pursued many crypto policies under Atkin’s recent project Crypto, and the chairman has set up an agenda to issue formal crypto rules in the coming months. Meanwhile, Congress is pushing the legislation significantly to more fully regulate the US digital asset market.