This week, we submitted a comment in response to the SEC’s proposed custody rule, together with Dragonfly Capital, Electric Capital, Haun Ventures, and Ribbit Capital.
While we are supportive of efforts to modernize the custody rule, we respectfully encourage the SEC to consider our comments to revise the proposal in key areas and urge the SEC to carefully consider how the proposal will work in practice before adopting a final rule.
Market participants have invested substantial time, energy and capital into developing safe and secure custody solutions for crypto assets. To protect investors without hindering the ability of RIAs to fulfill their fiduciary duties to clients, we believe the rule should incorporate industry best practices and remain adaptable to advances in technology.
In particular, we believe the proposal should:
- Permit RIAs to self-custody crypto assets when there is no available qualified custodian
- Allow pre-funding of accounts on trading platforms, without the platform itself needing to be a qualified custodian provided certain conditions are met
- Keep the definition of “qualified custodian” as-is and not narrow it to federally regulated banks.
Safeguarding crypto assets is critical. But any proposed rule in this area must be properly balanced against the risk of stifling emerging technology. We appreciate the opportunity to comment and respectfully encourage the SEC to consider our recommendations (and those of our peers) to revise the proposal.