Crypto may force SEC to modernize custody rules

New world, new rules. SEC Commissioner Hester Pierce is in the news again, this time sharing her thoughts on how the regulatory body might be forced to modernize its custody rules across the board.

In other words, crypto assets may end up forcing regulators to modernize rules and regulations around custody.

She shared these views during a chat at the Consensus 2021 event.

The US Securities and Exchange Commission leader is known as “Crypto Mom” for her crypto friendly approach to regulation, and was in conversation on best practices for financial advisors considering crypto assets for their clients’ portfolio.

And the second term commissioner said that advisors have a fiduciary responsibility to properly understand the asset class on which they are advising their clients. The regulatory guidance issued by the SEC merely provides stepping stones towards that goal.

Pierce said:

“The bottom-line message I have is that we have work to do in modernizing our custody rules all across the board. I think, as with many other areas, crypto may force us to do that modernization faster than we otherwise would do.”

She noted that custody is an especially important area when it comes to digital assets, but at the same time, applying existing custody rules is not as straightforward as far as this class of assets is concerned. In other words, something has to change.

Pierce also said that the language coming out of the SEC can often seem too cautionary, but it’s not the regulator’s role to make a judgement on this asset class.

During the chat, Pierce also commented on why the SEC is less than anxious to comply in the ETF space where the industry is seeking regulatory approval. The agency indicated earlier this month that Bitcoin volatility meant that the digital asset is not yet ready to support an exchange traded fund.

She opined that we’ll have to see what happens with this with a new chairman in place, as Gary Gensler starts to think about this issue with fresh eyes.

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