SEC Chair Proposes Overhaul of Digital Currency Regulations
In a significant announcement on Monday, the Chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, suggested that the existing regulations permitting brokers to serve as custodians for digital currencies may need a comprehensive overhaul. During a roundtable discussion focused on digital assets, he indicated that the SEC is contemplating a shift that could enable hedge funds to manage their crypto holdings independently.
Current Regulatory Landscape
Currently, only a handful of firms—specifically two—across the nation hold licenses as ‘special purpose broker-dealers’, a situation Gensler attributes to stringent regulations established by the previous regulatory framework. He pointed out that broker-dealers have not been outright barred from holding non-securities crypto assets, nor from dealing with crypto securities, yet the conditions for customer safety and capital adequacy remain unclear.
Investigation of Alternative Regulatory Approaches
In response to these challenges, Gensler has tasked SEC officials with investigating alternative regulatory approaches. This includes determining whether existing custody regulations should be updated to empower not just hedge funds, but also trading firms and investment advisors, to take on the responsibility of safeguarding digital assets themselves.
“This conversation around a potential new custody system reflects a growing recognition of the evolving landscape in the cryptocurrency market and the need for regulatory adaptation.”
