SEC Planning New Rule Change for Crypto That Makes It Harder for Hedge Funds To Work With Industry: Report

A new proposal from the U.S. Securities and Exchange Commission (SEC) is reportedly going to make it more challenging for hedge funds to work with the crypto industry.

According to Bloomberg, the SEC may advance a proposal that would create difficulties for crypto companies to become “qualified custodians,” which is a regulatory designation that allows companies to hold customers’ assets for safekeeping.

Bloomberg cites anonymous sources with knowledge of the proposal, but it is currently unclear as to how the SEC plans to make it more challenging for firms looking to work in the nascent industry to become qualified custodians.

If the SEC approves the rule proposal, institutional funds that have already made a foray into crypto may have to relocate the investments or face surprise audits, along with other complications, according to Bloomberg.

The rule can advance toward approval if a majority the of five-member SEC votes in favor of it. If approved, the SEC will seek out public feedback that it will take into account before a final round of votes.

The proposed rule would represent the latest enforcement action the SEC is taking in the aftermath of FTX’s high-profile implosion. Other moves include shutting down Kraken’s staking program for its clients and imposing a $30 million fine on the US-based crypto exchange.

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