Gensler proposes implementing new regulations prohibiting cryptocurrency exchanges from taking on the role of custodians.
Gary Gensler, Chair of the Securities and Exchange Commission, told the Investor Advisory Committee that the current custody standards do not effectively protect customers’ cryptocurrency holdings.
According to Gensler, the custody standards that are now in place are designed to protect the crypto funds and belongings of investors while competent custodians hold them. But, in his opinion, cryptocurrency exchanges that currently carry out that function are not equipped to act as custodians.
“Investment advisors cannot depend on crypto trading and lending platforms at this time as qualified custodians due to the general way in which these platforms carry out their operations.”
Gensler said, without providing particular examples, that in recent months there has been a wave of exchange failures that have left users hanging out to dry in bankruptcy court. He did not name any specific incidents.
He said the safeguarding standards should consider “significant upgrades” to guarantee that only certified custodians can handle users’ crypto assets.
The arguments that Gensler brought up were his own opinions; they do not reflect the policy of the SEC, nor do they necessarily represent the views of the agency’s employees.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Cryptocurrency investments are subject to market risks, and individuals should seek professional advice before making any investment decisions.