In short: Crypto exchange Coinbase has called for revisions to a proposed rule regarding registered investment advisers' (RIA) responsibility to hold clients' assets. The US Securities and Exchange Commission recently deemed Coinbase Custody a "qualified custodian", but the company believes the proposed RIA rule makes assumptions that are "unwarranted" and "detrimental" to client protection. Coinbase's chief legal officer, Paul Grewal, has written to the regulator suggesting revisions including enabling limited exposure to non-qualified custodians and withdrawal of the ban on RIA client trades on non-qualified crypto exchanges.
Our quick analysis:
Coinbase, the San Francisco-based cryptocurrency exchange, has called for certain changes to the proposed rule regarding registered investment advisers' (RIA) obligations to hold client assets at qualified custodians. The exchange believes that some aspects of the revised RIA rule make "unwarranted assumptions about custodial practice," despite the SEC deeming Coinbase Custody as a "qualified custodian."
In a letter to the securities regulator, Coinbase's Chief Legal Officer, Paul Grewal, highlighted the need for several revisions and stated that "the proposal titled 'Safeguarding Advisory Client Assets, Proposed Rule 223-1' is misguided." Grewal also suggested that some of the assumptions made on the proposal are unnecessary and inappropriate and could prove detrimental to consumer protection for various asset classes, including crypto, "whether or not they are securities."
Coinbase further advocated that the SEC should define state trust companies and other state-regulated financial institutions as "qualified custodians." It also proposed giving limited exposure to non-qualified custodians and withdrawing the ban on RIA client trades on crypto exchanges which are not qualified custodians.
Amidst this regulatory tussle with the SEC, Coinbase has been facing tremendous scrutiny in the US recently. The SEC served the exchange with a Wells notice, bringing an enforcement action against the firm. However, Coinbase's CEO, Brian Armstrong, confirmed that there are no plans to relocate overseas, but the exchange has ramped up international expansion as a result, recently launching Coinbase International Exchange, a Bermuda-based crypto derivatives platform for non-US institutional clients.
Coinbase seems to be taking the initiative to drive further clarity to the market with public rulemaking. As Grewal further added, "we appreciate the chance to weigh in and we look forward to engaging with the SEC to get this right."
In the face of this regulatory uncertainty, only time will tell how Coinbase and other crypto exchanges navigate the evolving regulatory landscape.
Image provided by Unsplash
Disclaimer: Our articles are NOT financial advice, and we are not financial advisors. Your investments are your own responsibility. Please do your own research and seek advice from a licensed financial advisor beforehand if needed.
Our quick analysis:
Coinbase, the San Francisco-based cryptocurrency exchange, has called for certain changes to the proposed rule regarding registered investment advisers' (RIA) obligations to hold client assets at qualified custodians. The exchange believes that some aspects of the revised RIA rule make "unwarranted assumptions about custodial practice," despite the SEC deeming Coinbase Custody as a "qualified custodian."
In a letter to the securities regulator, Coinbase's Chief Legal Officer, Paul Grewal, highlighted the need for several revisions and stated that "the proposal titled 'Safeguarding Advisory Client Assets, Proposed Rule 223-1' is misguided." Grewal also suggested that some of the assumptions made on the proposal are unnecessary and inappropriate and could prove detrimental to consumer protection for various asset classes, including crypto, "whether or not they are securities."
Coinbase further advocated that the SEC should define state trust companies and other state-regulated financial institutions as "qualified custodians." It also proposed giving limited exposure to non-qualified custodians and withdrawing the ban on RIA client trades on crypto exchanges which are not qualified custodians.
Amidst this regulatory tussle with the SEC, Coinbase has been facing tremendous scrutiny in the US recently. The SEC served the exchange with a Wells notice, bringing an enforcement action against the firm. However, Coinbase's CEO, Brian Armstrong, confirmed that there are no plans to relocate overseas, but the exchange has ramped up international expansion as a result, recently launching Coinbase International Exchange, a Bermuda-based crypto derivatives platform for non-US institutional clients.
Coinbase seems to be taking the initiative to drive further clarity to the market with public rulemaking. As Grewal further added, "we appreciate the chance to weigh in and we look forward to engaging with the SEC to get this right."
In the face of this regulatory uncertainty, only time will tell how Coinbase and other crypto exchanges navigate the evolving regulatory landscape.
Image provided by Unsplash
Disclaimer: Our articles are NOT financial advice, and we are not financial advisors. Your investments are your own responsibility. Please do your own research and seek advice from a licensed financial advisor beforehand if needed.
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