SEC’s Proposed New Rule for Qualified Custodians May Limit Crypto Investment for Certain Entities

02/14/2023 02:47 • NFT Newsflash • 126 views

According to reports, according to people familiar with the matter, the new proposal of the United States Securities and Exchange Commission (SEC) proposes to change the rules of qualified custodians, making it more difficult for hedge funds, private equity companies and pension funds to cooperate with many encryption companies.

The SEC’s new proposal proposes to change the rules of qualified custodian or make it more difficult for hedge funds to cooperate with encryption companies

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The United States Securities and Exchange Commission (SEC) is reportedly proposing new rules for qualified custodians that may limit investment in cryptocurrency by certain entities. According to sources familiar with the matter, hedge funds, private equity companies, and pension funds may find it more difficult to cooperate with many cryptocurrency companies if the new proposal is approved.

For the uninitiated, qualified custodians are entities that hold investors’ assets and maintain investor account records. In the context of cryptocurrency, qualified custodians must adhere to certain security standards and protocols to ensure the safekeeping of digital assets. These entities are a necessary component for institutional investors looking to invest in cryptocurrency.

According to the proposed rule, institutional investors would be required to hold their digital assets with a qualified custodian who meets certain regulatory requirements. The rule would also require these custodians to meet certain technology and infrastructure standards to protect investors’ digital assets. These changes are designed to reduce the risk of loss or theft of digital assets, which have plagued the cryptocurrency industry since its inception.

However, the proposed rule may also have unintended consequences for hedge funds, private equity companies, and pension funds, which may have difficulty finding qualified custodians that meet the new standards. It could limit the number of cryptocurrency companies that are suitable for investment by these entities, potentially lowering liquidity and increasing risk.

Despite the potential drawbacks, the proposed rule is seen as a positive step to increasing institutional investment in cryptocurrency, which has been slow to catch on due to concerns over security and regulation. If approved, the rule could provide greater certainty and stability to the market, leading to increased adoption and growth.

In conclusion, the SEC’s proposed changes to qualified custodians may limit crypto investment for certain entities, but it also seeks to improve investor protection and enhance the cryptocurrency market’s stability. The proposal shows the SEC’s cautious approach to the market while attempting to balance the needs of institutional investors and the broader crypto industry.

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