The Breakdown The SEC's Vicious "Qualified Custodian" Trap
Sep 5, 2024
Discover the fallout from Galois Capital's settlement with the SEC, which carries implications for crypto custody regulations and poses challenges for investment firms in the crypto market. Unpack the complexities behind the SEC's vague categorization of 'crypto-asset securities' and explore potential changes in regulatory policies amidst upcoming elections. Plus, learn about recent legal victories that showcase shifting political dynamics in the world of cryptocurrency.
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SEC Targets Crypto Funds for Custody Violations
- The SEC is targeting crypto funds like Galois Capital for custody rule violations.
- These violations involve using custodians like Fireblocks, not recognized by the SEC as "qualified."
Galois Capital's Early Redemption Issue
- Galois Capital allowed some investors early fund exits, deviating from their stated policy.
- The SEC viewed this as misleading investors, despite the challenging circumstances of late 2022.
Lack of Functional Crypto Custody Regulations
- The SEC's enforcement actions are problematic due to the lack of functional crypto custody regulations.
- Proposed rules requiring "qualified custodians" are impractical due to the scarcity of such entities for crypto assets.