SEC Chairman Gary Gensler Refutes Crypto Exchange’s Capability as Safe Custodians

03/02/2023 15:21 • AI Insights • 90 views

On March 2, Gary Gensler, chairman of the United States Securities and Exchange Commission (SEC), refuted the view that Crypto Exchange could become a safe and qualified custodian of investment advisers.

US SEC Chairman: Crypto Exchange is not a compliant custodian

Analysis based on this information:

One of the hotly contested subjects in the realm of cryptocurrency trading has always been the issue of custody. In the traditional financial world, stockbrokers serve as custodians for investors’ securities. However, in the volatile and unregulated world of cryptocurrency trading, exchanges serve as the custodians for investors’ digital assets. This issue of secure custodianship is so crucial that it has been the subject of debates in various regulatory circles around the world.

On March 2, the chairman of the United States Securities and Exchange Commission (SEC), Gary Gensler, in a testimony before the Senate Banking Committee meeting, refuted the idea that crypto exchanges could serve as safe and qualified custodians for investment advisers.

Gensler’s stance is that he does not believe cryptocurrency exchanges are qualified as safe custodians since they are unregulated, do not undergo the same scrutiny as traditional custodianship in the financial world, and are subject to greater risks of hacking and other security breaches. Gensler highlighted the risks and challenges that come with storing digital assets, noting that exchanges can be vulnerable to cyber breaches which could lead to the loss of the investors’ digital assets.

Furthermore, Gensler argues that traditional custodianship frameworks and regulations do not apply to cryptocurrencies. He believes that additional regulations need to be set up for the industry to provide a more secure environment in which investment advisers could operate.

Critics of Gensler’s rhetoric have argued that it could stifle the growth and innovation of the cryptocurrency industry. They argue that the industry deserves adequate regulatory attention and scrutiny without undue restrictions that could hinder its growth potential.

In conclusion, while the cryptocurrency industry has made impressive strides in the past decade, secure custodianship remains a crucial issue that needs to be addressed. Gensler’s statement serves as a reminder that the industry still has hurdles to jump, and regulatory scrutiny will play an indispensable role in ensuring security for investors’ digital assets.

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SEC Chairman Gary Gensler Refutes Crypto Exchange’s Capability as Safe Custodians

US SEC Chairman: Crypto Exchange is not a compliant custodian

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