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Crypto exchanges cannot be seen as qualified custodians, the US Securities and Exchange Commission (SEC) Chair Gary Gensler said on Thursday's Investor Advisory Committee meeting.
The Investor Advisory Committee recently proposed a new safeguarding rule for investment advisors based on the current 2009 custody rule. The proposal expands the custody rule to cover all of an investor's assets, including crypto. When talking about the proposal's intersection with crypto, Gensler said that the current custody rule had already covered a significant amount of crypto assets, and advisors were required to safeguard investors' crypto funds and securities with qualified custodians in complying with the current custody rule.
"Based upon how crypto trading and lending platforms generally operate, investment advisers cannot rely on them today as qualified custodians. To be clear: just because a crypto trading platform claims to be a qualified custodian doesn't mean that it is." Gensler said.
The recently proposed investment advisor protection rule requires that advisors and qualified custodians enter into written agreements with each other that help guarantee the custodian's protections. Custodians need to undergo annual evaluations from public accountants, provide account statements, and provide records upon request.
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