Three US regulators are warning banks about cryptocurrency activities
These plans by the authority will be the latest step by Washington to reduce the risk that cryptocurrency adoption could pose to the broader financial system. Regulators have taken an increasingly tough line after a series of stunning failures in 2022 that included digital asset trading platform FTX and crypto brokerage Voyager Digital.
Tightening fuels selling wave
Concerns about such a drastic measure have already led to a cryptocurrency sell-off in recent weeks. Bitcoin has fallen for two consecutive weeks, eroding the gains it made at the beginning of 2023.
Hedge funds and a number of venture capital and retirement funds are required to use qualified custodians for deposits of their clients’ assets. If the law is passed, it could mean that institutional funds that have invested in cryptocurrencies may have to transfer their clients’ holdings to third parties, and may also face sudden scrutiny regarding their custodial relationships or other related matters.
In 2020, the authority’s staff said that the authority faced challenges in determining which institutions qualified to be custodians of crypto assets, and in this regard sought public input.
The approval of a majority of the five members of the Commission is required for the proposal, before it is presented for public opinion. After that, they have to vote again for the final ratification of the law, after taking into account comments on it to take effect.
