Gary Gensler Warns Crypto Exchanges About Inconsistency with Custodians Status

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Gary Gensler, the head of the US Securities and Exchange Commission (SEC), has warned that even if a platform for trading digital assets claims to be a qualified custodian, it is not certain that it is.

He has noted that in the event of a crypto firm’s collapse, “client funds often become the property of a bankrupt company, putting users in a queue to meet claims as part of a lawsuit.”

Gensler has gone on to say that “investment advisors today cannot rely on [such platforms] as qualified custodians” and urged industry representatives to pay attention to the Kraken story, which involved the unregistered offer and sale of a staking program.

In response to the recent wave of industry bankruptcies, the SEC proposed extending the asset holding rule established in 2009 to cryptocurrencies, and if the rules are tightened, firms may need to transfer funds to banks or other traditional financial companies.