Coinbase’s Paul Grewal says SEC proposed custody rule ‘unnecessarily singles out crypto’

Coinbase Chief Legal Officer Paul Grewal says the U.S. Securities and Exchange Commission proposed amendments to federal custody requirements that require registered investment advisors (RIAs) to hold client assets with qualified custodians. I opposed the proposal.

The exchange officially announced its comment Regarding the proposed rule of May 8, deadline For submission.

Grewal tweeted that Blockchain Association policy adviser Marisa Tashman Coppel warned on May 8 that SEC rule changes could “significantly reduce” investments in cryptocurrencies. later announced.

Grewal said: twitter thread that the exchange agrees in the “spirit of the proposal”;

he added:

“We are confident that Coinbase Custody Trust Company will remain a QC even if the proposal is accepted as is.”

Comments on SEC Proposals

In its comments, Coinbase objected to the SEC’s proposal to change the types of banks permitted to act as qualified custodians to include only those “subject to federal regulation and supervision.” , state trust companies and other state-regulated financial institutions. Must remain a qualified custodian.

“The proposal does not include policy explanations or economic analysis in support of changing the scope of banks eligible to serve as eligible custodians,” Coinbase said in a statement, noting that such He added that the rule requires more reasoning, review of alternatives, and cost-benefit analysis. Offers suggestions.

Coinbase also stated that the proposed requirement by the SEC for RIAs to maintain ownership or control of client assets at all times would be “a cryptocurrency exchange that requires upfront funding to conduct transactions, rather than a qualified custodian. to justify banning RIA clients from trading on

The firm believes the proposal should allow clients’ assets to temporarily leave their eligible custodians and allow advisors to execute and settle trades within a day of trading. It argues that this restriction on cryptocurrency trading does not take into account why crypto exchanges conduct pre-funding trading nor the real-time settlement benefits it offers.

Grewal said in his Twitter thread:

“[T]His proposal unnecessarily singles out cryptocurrencies and makes inappropriate assumptions about custody practices based on stock markets. ”

According to Coinbase, the SEC must implement “uniform standards of ownership or control” that allow consumers to hold their crypto assets in a wider range of qualified custodians. The company notes that the proposal in its current form would be detrimental to broker-dealers and would impose higher cryptocurrency custody standards on them than banks and foreign financial institutions, noting that broker-dealers would be forced to seek other We believe that crypto assets should be stored under the same requirements as those. asset class.

Coinbase also proposed other amendments to the proposal, including adjusting coverage and insurance requirements by asset class and allowing sophisticated investors to negotiate custody agreements.

Grewal ended the thread by saying:

“We appreciate the opportunity to participate and look forward to working with the SEC to get this right. Public rulemaking is an important step in bringing more clarity to the market.”

Coinbase vs SEC

Coinbase has been embroiled in a legal battle with the SEC since receiving the Wells Notice in March. Since then, the exchange has repeatedly spoken out against SEC regulations.

The exchange recently obtained a court order compelling the SEC to respond to the exchange’s Mandoms petition, which called on the SEC to use a rule-making process to create guidance for companies in the cryptocurrency industry.