U.S. House Financial Services Committee Chairman Patrick McHenry and Digital Assets, Fintech and Inclusion Subcommittee Chair French Hill have sent a comment letter to the U.S. Securities and Exchange Commission (SEC), urging the regulator to roll back its proposed cryptocurrency custody rules.
The lawmakers said in their letter that the SEC’s proposed rule would prevent firms from serving as qualified custodians for registered investment advisers (RIAs) and go beyond the commission’s statutory authority.
They continue to call on the SEC to rescind its proposed rule and comply with its statutory mandate.
The move by the U.S. House Financial Services Committee comes after a number of industry leaders, including a16z and the Blockchain Association, questioned the SEC’s proposed tightening of cryptocurrency regulations.
The SEC’s proposed rules would require cryptocurrency custodians to meet the same standards as traditional custodians.
However, lawmakers argued that the rules would prevent smaller, innovative companies from offering their services as custodians, thereby creating a monopoly in the market for larger companies.
The letter from the U.S. House Financial Services Committee also argues that the proposed rules could push cryptocurrency innovation overseas, possibly harming the U.S.’s status as a global leader in the field.
The ongoing regulatory debate surrounding cryptocurrency custody is the latest development as the industry continues to attract institutional investors and mainstream adoption.
As the SEC considers its next steps, industry leaders and lawmakers will continue to advocate for regulations that balance innovation and investor protection while avoiding stifling the growth of the cryptocurrency market.