Coinbase's Paul Grewal has criticized SEC's RIA custody rule for unfairly singling out crypto.
Coinbase has called for certain modifications to the proposed rule regarding registered investment advisers’ (RIA) obligations to hold client assets at qualified custodians.
Even as the United States Securities and Exchange Commission (SEC) deemed Coinbase Custody as a “qualified custodian,” the crypto exchange believes the revised RIA rule makes “unwarranted assumptions about custodial practice.”
Revisions Needed
The chief legal officer of the San Francisco-based company, Paul Grewal, believes the proposal titled ‘Safeguarding Advisory Client Assets, Proposed Rule 223-1’ is “misguided.”
In a new letter to the securities watchdog, Grewal highlighted the need to make several revisions. He also said that certain assumptions made on the proposal are unnecessary and inappropriate and could prove “detrimental” to consumer protection for various asset classes, including crypto, “whether or not they are securities.”
The letter advocated that the SEC should continue to define state trust companies and other state-regulated financial institutions as “qualified custodians.” Grewal also proposes enabling limited exposure to non-qualified custodians and withdrawing the ban on RIA client trades on crypto exchanges, which are not qualified custodians.
The exec further pointed out that “the SEC’s rule should tailor standards of care by asset class and client type” while simultaneously allowing sophisticated clients to negotiate their own contracts.
“We appreciate the chance to weigh in and we look forward to engaging with the SEC to get this right – public rulemaking is a critical step in bringing further clarity to the market.”
Coinbase vs SEC: Regulatory Tussle
Coinbase has been under tremendous regulatory scrutiny in the country lately. The SEC had also served the crypto exchange with a Wells Notice officially bringing an enforcement action against the exchange. While the company’s CEO, Brian Armstrong, confirmed that there are no plans to relocate overseas, he also stressed that Europe has been “incredibly welcoming” on the regulatory front.
With the US failing to deliver regulatory clarity, Coinbase has ramped up international expansion. It recently launched Coinbase International Exchange, a Bermuda-based crypto derivatives platform for non-US institutional clients.
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