US Congressmen Urge SEC to Maintain Definition of Qualified Custodian Unchanged

In a recent development, Congressmen Michael Flood and Ritchie Torres have written a compelling letter to SEC Chair Gary Gensler, urging the regulatory body to retain the current definition of “qualified custodians”. This article will delve into the details of their plea and explore the significance of the definition in the context of the U.S. Securities and Exchange Commission’s (SEC) proposed changes to the Investment Advisors Act 1940.

The Urgent Appeal by Congressmen Congressmen Michael Flood and Ritchie Torres have expressed their concern over the proposed changes to the definition of “qualified custodians” by the SEC. In their letter to SEC Chair Gary Gensler, they emphasize the importance of maintaining the existing rules and regulations without any alterations. The congressmen believe that the inclusion of state-chartered banks, state-regulated trust companies, and federally regulated entities as qualified custodians has been effective thus far and should not be tampered with.

SEC’s Proposed Changes to the Investment Advisors Act 1940 The U.S. Securities and Exchange Commission (SEC) proposed specific amendments to the Investment Advisors Act 1940 earlier this year. These proposed changes seek to redefine the category of “qualified custodians”. While the exact details of the proposed modifications are not mentioned in the available sources, it is clear that the revisions have prompted Congressmen Flood and Torres to intervene and advocate for the preservation of the current definition.

Importance of the “Qualified Custodian” Definition The definition of “qualified custodians” holds significant importance within the regulatory framework of the SEC. It establishes the criteria that financial institutions must meet in order to provide custody services for digital assets, including cryptocurrencies . Currently, state-chartered banks, state-regulated trust companies, and federally regulated entities qualify as custodians under the existing definition. This definition ensures that investors’ funds and digital assets are safeguarded by trusted and regulated entities, reducing the risks associated with custody in the crypto industry.

SEC Chair’s Perspective on Crypto Exchanges as Qualified Custodians SEC Chair Gary Gensler has raised concerns about whether crypto exchanges can be classified as qualified custodians for investment advisers. While the details of his reservations are not elaborated upon in the provided sources, it is evident that the SEC Chair is questioning the suitability of crypto exchanges for fulfilling the role of qualified custodians. This viewpoint adds further significance to the ongoing discussion surrounding the definition and its potential revisions.

The plea made by Congressmen Michael Flood and Ritchie Torres to SEC Chair Gary Gensler to maintain the existing definition of “qualified custodians” highlights the importance of regulatory clarity in the crypto industry