US Securities Regulator Looks Into Wall Street’s Crypto Custody

Key Points:

• Traditional Wall Street investment advisors who might be providing digital asset custody to their clients without the necessary credentials are being investigated by the United States Securities and Exchange Commission (SEC).
• SEC is focusing a lot of its investigational efforts on determining whether registered investment advisors have complied with the laws governing the custody of client cryptocurrency assets.
• SEC hasn’t turned a blind eye to traditional investment firms in the digital asset space.

Traditional Wall Street investment advisors who might be providing digital asset custody to their clients without the necessary credentials are being investigated by the United States Securities and Exchange Commission (SEC).

According to a Jan. 26 Reuters article citing “three persons with knowledge of the matter,” the SEC’s investigation has been ongoing for a while but picked up speed following the failure of the cryptocurrency exchange FTX.

According to the sources, the SEC’s investigations have not previously been known because they are confidential.

According to the Reuters story, the SEC is focusing a lot of its investigational efforts on determining whether registered investment advisors have complied with the laws governing the custody of client cryptocurrency assets.

Investment advice businesses are required by law to comply with the custodial precautions outlined in the Investment Advisers Act of 1940 and be “qualified” to provide custody services to customers.

The recent revelation suggests the SEC hasn’t turned a blind eye to traditional investment firms in the digital asset space, Anthony Tu-Sekine said, who leads Seward and Kissel’s Blockchain and Cryptocurrency Group in a note to Reuters:

“This is an obvious compliance issue for investment advisers. If you have custody of client assets that are securities, then you need to custody those with one of these qualified custodians.”

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