Wall Street’s main regulator proposed heightened requirements for businesses that safeguard assets for fund managers, a move that could further squeeze crypto platforms such as Coinbase Global Inc.
as the industry comes under pressure from regulators.
The Securities and Exchange Commission voted 4-1 Wednesday to propose a rule that would expand the types of assets that investment advisers, such as hedge funds and pension funds, are required to hold using qualified custodians.
It would also direct advisers to reach written agreements requiring, for example, that custodians receive annual evaluations from public accountants and provide account statements.
Qualified custodians traditionally include banks, trust companies and broker-dealers. But the idiosyncrasies of keeping assets such as bitcoin safe from theft or hacks have in recent years led trading platforms such as Coinbase to start offering the service.
SEC Chairman Gary Gensler has said that crypto firms’ custody practices might not clear the legal hurdles necessary to keep their customers’ assets safe in the event of a bankruptcy. In January, a judge ruled that cryptocurrencies deposited in Celsius Network LLC’s interest-bearing accounts belonged to the bankrupt firm rather than to its customers.
An expanded version of this story appears on WSJ.com.
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