SEC Public Hearing on Amendments to the Digital Assets Regulations

SEC public hearing on proposed amendments to the regulations on custody of clients’ assets in digital asset businesses to enhance investor protection

The Securities and Exchange Commission (SEC) is seeking public comments on additional amendments to the regulations on custody of clients’ assets in digital asset businesses, which includes keeping custody of fiat money and seeking benefits from the clients’ assets for the clients’ interest. The proposed amendments aim to enhance protection for digital asset investors.

The SEC’s policy is to strengthen the oversight of digital asset business operators with a focus on continued quality development and investor protection reliability of such business operators. This means the records of investors’ assets under custody of the business operators must be accurate, complete and updated while the assets must be properly protected from relevant risks. Therefore, the SEC is proposing additional regulations related to custody of clients’ assets by requiring that digital asset business operators undertake the following actions: 

1) Custody of fiat money: withdrawal and transfer of fiat money from the accounts opened for the benefit of clients shall comply with the principles for decentralized approval authority, multi-sign approval authority, and check and balance, in the similar manner as custody of digital assets;

2) Custody of fiat money and digital assets: the use of a client’s assets for the benefit of another client or other persons shall be prohibited and clients’ assets shall be reconciled every business day to ensure accurate and updated records of clients’ assets; and 

3) Seeking benefits from clients’ assets: Seeking benefits from clients’ fiat money shall be prohibited except in the form of deposit with commercial bank(s). In this regard, digital asset business operators and the clients may agree on an interest rate not exceeding the actual rate the business operators receive from the commercial bank(s). In case of digital assets, seeking benefits for clients shall be prohibited, including in the form of digital asset lending to other persons. 

Business operators shall comply with the additional regulations above within one month as from the effective date of the regulations.

Back to top button