The Securities and Exchange Commission voted 4-1 on Wednesday proposed to expand the types of assets that investment advisers, such as hedge funds and pension funds, are required to hold using qualified custodians. The five-member commission voted on the proposed rulemaking on Wednesday morning.
SEC Chair Gary Gensler has repeatedly said that crypto firms do not comply with the rules and when these firms go bankrupt investors’ assets often become the property of the failed company, leaving the true owners of the assets in line at the bankruptcy court.
Chair Gary Gensler also mentioned that many investment advisers have already lost a massive amount of money in the bankruptcies of FTX, Three Arrow Capital (3AC), Celcius Network, Voyager Digital, and Blockfi.
Mr. Gensler said, “The current business model in crypto exchanges does not meet the qualified custodial standard.”
According to the material released by the agency, SEC is intended to ensure client assets are properly segregated and held in accounts designed to protect the assets in the event of a qualified custodian bankruptcy or other insolvencies.