War on Crypto Newly Filed Letters Lambast Proposed SEC Custody Rules

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According to recently filed letters, a proposal by the US securities regulator to tighten crypto custody rules has faced opposition from at least two industry supporters .

On May 8, the deadline for comments on the proposal, crypto industry advocacy body Blockchain Association filed its letter to the Securities and Exchange Commission (SEC) criticizing its proposal to change its custody rule.

Three days earlier, a similar letter was sent by Web3 venture capital fund Andreessen Horowitz (a16z).

Marisa Tashman Coppel, a political lawyer at the association, tweeted on May 8 that the rule would significantly reduce investments in digital assets and claimed that in its current form the rule is illegal.

That same day, a16z General Counsel Miles Jennings tweeted his letter, saying the company didn’t mince words and called the SEC’s proposal a misguided and transparent attempt to wage war on cryptography.

In its letter, the Blockchain Association provided over a dozen separate arguments to push back against the SEC. Among other claims, he said the rule exceeded the authority of the SEC, would prevent advisers from transacting with crypto exchanges, and leave investors’ assets more at risk.

A16z detailed similar arguments in his letter, but focused more on its effects on registered investment advisers, namely that advisers would be prevented from using crypto and that the rules could violate the duty of care that the SEC requires these companies.

He called the ban on advisors trading crypto on centralized exchanges illegal, unenforceable and dangerous.

Related: Defending Against SEC Will Cost Ripple $200 Million, Says CEO Brad Garlinghouse

Still pending SEC approval, the February proposal would apply stricter rules to investment advisers responsible for the custody of assets, including crypto.

Companies will have to properly segregate assets and custodians will be required to submit to annual audits by public accountants among a range of other transparency measures.

Gensler specifically targeted crypto exchanges with the rule, and said some crypto trading platforms offering custody services are not true qualified custodians.

The proposal was even rejected within the SEC. Commissioner Hester Pierce questioned the applicability and scope of the rules and its apparent targeting of crypto and crypto-related companies.

Magazine: Crypto Regulation Does SEC Chairman Gary Gensler have the final say?

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