2023-05-12 13:23:28
Patrick McHenry, Chairman of the House Financial Services Committee, along with six other subcommittee chairs, expressed their dissatisfaction with the SEC’s proposed rule on the custody of client assets in a carta addressed to SEC Secretary Vanessa Countryman.
Chairman McHenry and his co-chairs wrote that the SEC was acting outside of its statutory powers in their proposed rules., known as the Registered Investment Adviser (RIA) rule, which sets stricter criteria for qualified custodians of client assets. They joined several prominent members of cryptocurrency companies in the industry in expressing their opposition.
#NEW: Chairman @PatrickMcHenrySubcommittee Chairman @RepFrenchHilland all members of the Committee’s Republican leadership team sent a comment letter slamming @SECGov‘s disastrous custody proposal and demanding its withdrawal.
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— Financial Services GOP (@FinancialCmte) May 11, 2023
According to his letter, the new regulations would apply to assets that are not under the agency’s jurisdiction, such as “art, cash, raw materials and non-traditional assets”. This might possibly infringe the authority of other regulators by imposing custody requirements on organizations that are already subject to custody proceedings regulated by a separate regulatory agency.
In addition, the Finance Committee leadership believes that the proposed rule would reduce the level of negligence required for compensation from gross negligence to simple negligence, which would represent a significant departure from traditional custody practice and would impose significant additional costs on custodians. qualified.
THE COMMITTEE ASKS THE SEC TO WITHDRAW ITS REGULATORY PROPOSAL
Therefore, Patrick McHenry, French Hill, and the subcommittee chairs are cooperatively suing the SEC to withdraw their “disastrous custody proposal,” saying in the letter that:
“We urge the SEC to withdraw the Rulemaking Proposal and reconsider its approach to regulating entities outside of its jurisdiction.”
If this regulation is implemented, it will not only restrict small start-ups from participating in the custody of digital assets, it will also prohibit many major institutions from offering the service on a large scale.
As indicated, the Proposed Rule will have an excessive effect on digital asset market participantsas entrepreneurs and companies in the ecosystem already struggle to find banks willing to store their assets.
This might hinder innovation and growth in the digital asset industry, as well as limit access to custody services for smaller players. That’s why many industry participants are urging the SEC to create a platform that fosters innovation in this rapidly evolving space, while also protecting investors..
Opponents of the SEC’s regulatory proposal include companies such as the Blockchain Association and a16z, which recently submitted letters to the regulator stating, among other things, that the proposal is another misguided attempt to wage war on the cryptocurrency industry.
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