Three banking trade groups have expressed reservations about SEC plans for digital asset custody in a letter to the Securities Exchange Commission Crypto Task Force. The Bank Policy Institute (BPI), the Association of Global Custodians (AGC), and the Financial Services Forum (FSF) have concerns related to a speech given by SEC Chair Paul Atkins in May.
Atkins said: “It is important to provide clarity on the types of custodians that qualify as a ‘qualified custodian’ under the Advisers Act and Investment Company Act, as well as reasonable exceptions from the qualified custody requirements to accommodate certain common practices within crypto asset markets. Many advisers and funds have access to self-custodial solutions that incorporate more advanced technology to safeguard crypto assets as compared to some of the custodians in the market. Consequently, the custody rules may need to be updated to allow advisers and funds to engage in self-custody under certain circumstances.”
The banking associations disagree with this approach. The banks’ position may appear self-serving, but their letter raises two important points. Firstly, any changes should not sacrifice investor protection. And secondly, for institutions to continue to expand engagement with cryptocurrencies, they need to have confidence around custody. The Associations point out that any weakness in custody does not just have a direct impact on those that lose money, but can have repercussions on the entire market. The collapse of FTX is one example.
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