The Chief Legal Officer for Coinbase, Paul Grewal, has suggested that the Securities and Exchange Commission (SEC) should consider various changes to its proposed rules on registered investment advisors’ (RIAs) responsibility for safeguarding their client’s funds with authorized custodians.
A Letter from Coinbase Chief Legal Officer
The letter recommends broadening the custodial requirements concept to guarantee that it is flexible for potential investments and adequately protects them.
Despite the fact that the SEC recognizes Coinbase Custody Trust Company as a “qualified custodian,” Coinbase claims that the new RIA custody rule unjustly affects crypto and makes erroneous predictions regarding custodial practices related to securities.
Crypto Not Adequately Protected by SEC Rules
Grewal, an executive at Coinbase, said in the letter dated May 8 that other asset classes, like cryptocurrencies, are not adequately protected by the proposed SEC rules.
The Coinbase Custody Trust Company is a registered custodian for RIA customers. This custodian is in charge of safeguarding customer funds from potential hazards such as bankruptcy and cyberattacks.
Criticism of Newly Proposed Rule
Grewal criticized the newly proposed rule titled “Safeguarding Advisory Client Assets, Proposed Rule 223-1” in a letter to the SEC as misguided. Grewal requested a change to the plan and staff instructions, emphasizing the need of protecting every category of asset, particularly crypto assets, which were previously not categorized as securities.
Grewal proposes a number of regulatory changes to safeguard investors, including identifying state trust firms and other government-regulated financial organizations as qualified custodians, which is a long-standing legislative and SEC policy. He also supports permitting limited participation in non-qualified custodians and lifting the prohibition on RIA client trading on non-qualified custodian crypto exchanges.
Coinbase Vs. SEC
The exchange has regulatory concerns with the Securities and Exchange Commission (SEC), and it has launched a lawsuit against the SEC for regulatory obscurity. It is clear that the exchange does not support the methodology followed by the regulator for regulation of the crypto industry.
Given that the cryptocurrency business continues to face heightened regulatory scrutiny, a Ripple board member has proposed that Coinbase can explore banking services, which might assist the exchange in complying with financial rules more effectively by offering conventional banking services.
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