New Custody Rules Signal ‘Regulatory Reset’ for Digital Assets: SEC Roundup
Welcome to SEC Roundup, a bimonthly video series by former Securities and Exchange Commission senior trial counsels Nick Morgan and Tom Zaccaro, founders of the nonprofit advocacy group Investor Choice Advocates Network.
In this episode, former SEC Commissioner Troy Paredes and Cooley Special Counsel Rodrigo Seira discuss the commission’s evolving approach to financial innovation and digital asset regulation, offering insights valuable to investment advisors navigating the changing regulatory landscape.
The conversation centered on the SEC’s renewed commitment to stakeholder engagement, showcased through its recent series of roundtables designed to address jurisdictional questions and regulatory frameworks. This approach marks a significant shift from the previous administration’s enforcement-focused strategy, which Seira characterized as having “a very strained relationship” with innovative financial technologies.
Paredes emphasized the commission’s current willingness to “embrace the promise and opportunity” of financial innovation while still upholding core regulatory principles. “The commission is looking to generally embrace the promise and opportunity that the underlying technology affords and what that innovation means in the context of securities markets,” he noted.
The SEC withdrew on May 15 its previous staff opinion on broker-dealer custody of digital asset securities. The withdrawal takes away the “scare” factor the announcement caused when it came out. Presumably a further announcement or rulemaking will follow. When the staff announcement first came out, it was interpreted as an ominous suggestion that satisfying custody requirements for digital assets could be impossible.
The SEC announcement directly exemplifies the regulatory shift toward “custody” that Paredes and Seira discuss, highlighting the SEC’s move away from previous rigid approaches to develop more technology-aligned frameworks for digital assets.