US Securities Regulator Tests Wall Street Over Crypto Custody: Report

According to sources, The Regulator has been looking into how registered investment advisors have been offering their Clients.

The United States Securities and Exchange Commission (SEC) has been probing traditional Wall Street investment advisors that might be offering digital asset Custody to its Clients without the appropriate Qualifications.

A Jan. 26 Reuters report citing “three sources with knowledge of the request” said the SEC’s investigation has been going on for a very long time currently however accelerated after the collapse of Crypto exchange FTX.

The investigations by the SEC have not been known already before as the agency’s inquiries are not public, said the sources.

According to the Reuters report, a significant part of the SEC’s efforts in this request are looking into whether registered investment advisors have met the principles and regulations around the custody of client Crypto assets.

By Regulation, investment advisory firms should be “qualified” to offer Custody services to clients as well as complying with custodial safeguards set out in the Investment Advisers Act of 1940.

The SEC to look for lucidity on the matter however didn’t receive an immediate reaction.

The recent revelation proposes the SEC hasn’t choosen to disregard traditional investment firms in the digital asset space, Anthony Tu-Sekine said, who drives Seward and Kissel’s Blockchain and Cryptocurrency Group in a note to Reuters:

“This is a compliance issue for investment advisers.If you have custody of client assets that are securities, then, at that point, you want to custody those with one of these qualified custodians.”

On Nov. 15, the Wall Street Blockchain Alliance (WSBA) composed a letter to the SEC to look for clarity on what potential amendments, if any, apply to the “Custody Rule” in accordance with digital assets.

The WSBA to ascertain whether they have received a Reaction from the SEC.

In the interim, the securities regulator has continued to beef up its crypto enforcement efforts throughout the year. In May 2022, it increased its “Crypto Assets and Digital Unit” team by almost 100 percent.

It’s also kept occupied with dealing with the ongoing lawsuit against Wave Labs, actions relating to FTX’s collapse and its founder Sam Bankman-Fried, among some more.