SEC officials demand clearer rules for crypto asset custody

Traders Union
All News
Crypto
SEC urged to clarify crypto asset rules

Mark Uyeda’s call for reforms

Commissioner Mark Uyeda called for reforms that would allow registered investment advisers to use state-chartered, limited-purpose trust companies as qualified custodians. He stressed that the previous administration’s stance — considering "most crypto assets" as funds or securities — caused confusion and forced advisers to limit clients' investment opportunities. Uyeda pointed out that not all crypto assets are securities and urged the SEC to clarify whether certain crypto holdings should be classified as "funds" under the Custody Rule. He also emphasized the need to establish a competitive and legally compliant custodial infrastructure.

Caroline Crenshaw’s focus on investor protection

Commissioner Caroline Crenshaw, in her remarks, emphasized the importance of maintaining strong investor protections. She compared asset custody to trusting an airline with personal luggage and questioned whether a dual regulatory regime for traditional and crypto assets could maintain the same high safety standards. Crenshaw highlighted blockchain-specific risks such as smart contract vulnerabilities and hacking threats, warning that weakening standards could increase risks for investors and the financial system as a whole, particularly in cases of custodian insolvency.

Hester Peirce’s call for flexible regulation

Meanwhile, Commissioner Hester Peirce advocated for a more flexible and thoughtful approach to regulation that considers the unique nature of blockchain technology. She noted that qualified custodians are appropriate for some crypto assets, but in other cases, self-custody might be a safer alternative. Peirce criticized the SEC’s current stance, likening it to a "floor is lava" game where participants must guess their way through regulatory gaps. She proposed building "walkways over the lava" by developing clear, adaptive rules that foster both investor protection and technological innovation.

"It’s time we find a way to end this game. We need to turn on the lights and build some walkways over the lava pit," Peirce said.

Peirce also stressed that decentralized blockchain systems provide investors with new levels of control and security, and emphasized that regulation must evolve alongside technology rather than seek to restrict it.

The roundtable concluded with a growing consensus: crypto asset custody urgently requires a regulatory framework that balances investor protection with technological flexibility — and time to create it is running out.

It is worth recalling that earlier, Paul Atkins, the newly appointed SEC Chairman, pledged to introduce sweeping changes to cryptocurrency regulation, aiming to reverse what he described as a years-long process that has stifled innovation.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.