The regulation of cryptocurrencies in the United States has always represented a challenge, but the recent DRI directives are beginning to bring a little clarity on the care of these assets. The agency's investment management division has published a non-action letter authorizing registered investment advisers and regulated funds to keep digital assets with certain trust companies approved by the State, without the risk of prosecution. If some commissioners, including Hester Peirce, see it as a good steps in the right direction, others, like Caroline Crenshaw, alert the potential risks and inconsistencies of the device.
In short
- The SEC has published directives clarifying how registered investment advisers and regulated funds can hold cryptographic assets with trust companies approved by the State.
- The commissioners are divided on the directives, Hester Peirce supporting them for their clarity and the protection of investors while Caroline Crenshaw warns that they weaken the guarantees and create incoherent rules.
- These directives intervene as the SEC advances the Crypto Project and that the Congress works on legislation aimed at establishing a more coherent regulatory framework for digital assets.
SEC is publishing new guidelines on cryptocurrencies
The non-action letter specifies how existing childcare rules, from investment Advisers Act and investment Company Act, apply to digital assets. Until now, it was not clear if state approved by the state could be considered as “qualified Custodians”.
The Investment Management Division now clarifies this point : She “Will not recommend an execution action against a registered advisor or a regulated fund having dealt with a state trust company as a” bank “for the holding of cryptographic assets as well as species or equivalents in associated cash”. This position marks a turning point in the way in which the dry envisages the role of Custodians in the field of digital assets.
Peirce greets an advance for regulatory clarity
Hester Peirce, favorable to a more open approach to cryptocurrencies, has praised this letter as a positive step For advisers and funds already exposed to digital assets. She specified that the text does not modify the legal definition of the Custodians provided for by existing laws, but confirms that certain state trust companies already fulfill the conditions required to ensure assets when they operate under a framework offering protections comparable to those of other approved institutions.
Peirce also believes that these guidelines will reduce uncertainty for investors and shareholders. According to her, they offer an opportunity to rethink childcare rules in order to adopt a more flexible approach, focused on the protection of investors rather than on too strict definitions.
Crenshaw denounces a weakening of protection rules
Conversely, the Democratic Commissioner Caroline Crenshaw has firmly opposed to the letterbelieving that it weakens current standards by introducing a new category of custodians that do not meet the existing requirements. It considers that the decision is based on insufficient legal and factual bases and that it risks compromising the guarantees intended to protect investors.
Crenshaw has also pointed out a problem of equity: this policy would allow certain state trust companies to avoid the complete approval process imposed by the Office of the Comptroller of the Currency (OCS). According to her, this could create a variable protection system according to the states, a “regulatory roulette at 50 states”, benefiting the crypto industry at the expense of savers' security.
The only advanced justification for this softening is based on the erroneous idea that no other entity can ensure custody of digital assets in compliance with our rules. But this measure precipitates things: it anticipates the regulations of the Commission, the requests of federal charters from the OCC and the initiatives of Custodians already reliable within the framework in force.
Caroline Crenshaw
This non-action letter is part of a more global modernization effort led by the dry under the direction of Paul S. Atkins. Through the Crypto Project, the agency seeks to adapt its supervision to digital assets and lay the foundations for a more coherent frame. In parallel, the US Congress is working to adopt unified legislation in order to provide more clarity and stability to the cryptocurrency market.
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