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- 1 SEC Chair said crypto firms don’t meet custody requirements.
- 2 He stepped up warnings to asset managers about using predictive data analytics and how they work with crypto firms.
Gary Gensler continues to crack down on the crypto industry as he feels crypto is not necessarily compliant compared to traditional finance. “Our goal is for crypto to become compliant,” he said. He thinks that crypto and US securities laws can be compatible.
SEC’s Gensler saying
According to a Bloomberg report, the United States Securities and Exchange Commission (SEC) Chair, Gary Gensler, said on March 2nd that predictive data technologies might create “inherent conflicts” of interest related to investment advisers’ duty to their clients. He also added that he’d asked the agency’s staff to recommend addressing the issues.
In remarks prepared for an SEC event, Gensler said, “When an adviser provides advice, in part through predictive data analytics, do those algorithms optimize for the investor’s interests and place the investor’s interests in front of the adviser’s own interests?”
Predictive data analytics can include a range of information drawn from consumers’ or investors’ personal information, devices, habits, and other sources. Financial service companies can use the data to suggest new products, transactions, and other services to individuals.
SEC’s Gensler also repeated his concerns over crypto firms holding assets for investment firms.
In the supervision of Gensler, SEC recently proposed expanding its “qualified custodian” requirements to cover all assets, including virtual currencies. It is said that if this is finalized, the plan could raise problems for crypto platforms holding digital assets owned by clients of hedge funds and private equity firms.
Yesterday, SEC’s Gesler noted, “Based upon how crypto trading and lending platforms generally operate, investment advisers cannot rely on them today as qualified custodians.”
On the other hand, the Congressional Republicans don’t seem happy with an SEC effort to rein in crypto platforms. House Financial Services Committee Chair Patrick McHenry, R-N.C., and Sen. Cynthia Lummis, R-Wyo. said yesterday in a letter to the SEC that they have “concerns” about a Staff Accounting Bulletin known as SAB 121. It must be noted that both of them are working on legislation to regulate the cryptocurrency industry.
At issue is how crypto platforms calculate risk. The crypto platforms did not include customers’ crypto assets when calculating how much risk their businesses face. And SAB 121 effectively tells them they should include those customer assets in their risk analyses.
Here, SAB 121 represents the first time digital asset platforms are receiving instruction about accounting for the unstable values of cryptocurrencies. The SEC’s Office of the Chief Accountant issued SAB 121 last March.
Meanwhile, McHenry and Lummis are concerned it would create greater consumer risks and increase financial institutions’ compliance costs. Since the bulletin was issued, the SEC has received pushback from banks and cryptocurrency companies.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
