Bloomberg has learned of the SEC's plan to make it harder for hedge funds to work with crypto firms

Bloomberg has learned of the SEC's plan to make it harder for hedge funds to work with crypto firms

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Author: Robert Strickland
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Bloomberg has learned of the SEC's plan to make it harder for hedge funds to work with crypto firms
The U.S. regulator intends to introduce new rules that could make it harder for crypto firms to become "qualified custodians"

The U.S. Securities and Exchange Commission (SEC) plans to propose amendments to crypto sphere regulations on Feb. 15 that could make it more difficult for hedge funds, investment firms, and venture capital and pension funds to work with crypto firms, Bloomberg reported, citing its sources.

It's not yet clear what specific innovations the SEC will try to promote. Bloomberg's sources said the possible changes would make it harder for cryptocurrency companies to become qualified custodians, which is the party responsible for holding assets.

If the SEC's proposed rule is approved, it could mean that institutional funds that deal in cryptocurrencies would be forced to move their clients' assets elsewhere.

Funds and investment firms could also face unexpected audits related to their custodial relationships or other consequences, Bloomberg claims.

An SEC spokesman declined to comment.

The SEC proposal would be one of the regulator's first legislative initiatives to tighten oversight of the crypto industry in 2023. In early February, the commission announced plans to scrutinize cryptocurrency-related investment firms to ensure the safety of retail investors. Among other things, the SEC intends to monitor their compliance with asset custody requirements.

 

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