SEC under fire for its custody rule: Law Decoded, May 8–15
Last week was harsh for the United States Securities Exchange Commission (SEC), with industry figures and officials publicly criticizing the regulator.
May 8 was the deadline for feedback on the SEC’s proposed custody rule, and there was feedback aplenty. Andreessen Horowitz’s general counsel Miles Jennings called the proposal a “misguided and transparent attempt to wage war on crypto.”
The Blockchain Association claimed the rule exceeds the SEC’s authority, would inhibit advisers from transacting with crypto exchanges and leave investors’ assets at more risk. The chair of the United States House of Representatives Financial Services Committee, Representative Patrick McHenry, wrote that the SEC was exceeding its authority in the proposed rule, known as the registered investment adviser rule.
Another reason for criticizing the SEC was its “legal threat” to Coinbase in late March, accusing it of “possible violations of securities laws.” The U.S.-headquartered crypto exchange filed a complaint, supported by a U.S. Chamber of Commerce amicus brief last week.
The Chamber of Commerce threw its full weight behind Coinbase, accusing the SEC of deliberately creating a precarious and uncertain landscape for crypto companies operating in the country. Paradigm — the crypto investment firm led by Coinbase co-founder Fred Ehrsam — has also filed an amicus brief. According to the firm, regulatory uncertainty could lead to a “de facto ban on digital asset trading platforms” without a clear path to register with the SEC.
Finally, watchdog group Empower Oversight Whistleblowers and Research (EMPOWR) has filed suit against the SEC to force it to comply with a Freedom of Information Act request for access to communications between former
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