The letter criticizes the offered rule for its impact on the banking industry, particularly in ways that would be disadvantageous to the digital asset industry.
The chair of the United States House of Representatives Financial Services Committee and six subcommittee chairs have sent a letter to U.S. Securities and Exchange Commission (SEC) Secretary Vanessa Countryman voicing their concerns over the agency’s offered advisory clients custody regulation. They join a string of crypto industry numbers in expressing their objections.
Financial Services Committee Chair Patrick McHenry and his colleagues authored that the SEC was exceeding its authority in its offered rule, known as the registered investment adviser (RIA) regulation — which toughens necessaries for qualified custodians of client assets.
According to their letter, the proposed regulation would apply to assets beyond the agency’s jurisdiction, similar to “ art, cash, commodities, and nontraditional assets ” and impede “ the jurisdiction of different regulators by imposing custody regulations on entities that earlier have their custody practices regulated by another regulator. ”
Related: US lawmakers hold EU and UK as examples of crypto regulation in a joint hearing
The letter claims that the offer deviates from standard industry practice and would be “ incredibly expensive ” and would “ undermine banks ’ most introductory function, holding cash. ” Digital asset market participants would be especially hard hit:
“The Proposed Rule would have an outsized impact on digital asset market participants, as entrepreneurs and companies within the ecosystem already struggle to find banks willing to custody their assets.”
The digital asset market frequently turns to state-chartered banks and trusts for banking services. The proposed regulation’s restriction of qualified custodians to federally chartered entities would create complications for them and degrade competition, the letter spoke. In addition, the proposed regulation would interact with the SEC’s Staff Accounting Bulletin 121 to disadvantage the banking industry further.
The proposed regulation has garnered unfavorable feedback from the Blockchain Association and venture capital enterprise Andreessen Horowitz. Chief legal officer Paul Grewal requested changes to the offer in a letter to the SEC.
(DEREK ANDERSEN, Cointelegraph, 2023)