SEC Considers Withdrawing Crypto Custody Rule Amid Industry Pushback

The US Securities and Exchange Commission (SEC) is considering altering or withdrawing a proposed rule that would impose stricter custody standards for investment advisers handling crypto assets. The rule, introduced under the Biden administration in February 2023, aimed to ensure that investment advisers only custody client crypto with a qualified custodian. However, the proposal faced significant opposition from industry stakeholders and certain SEC commissioners.

Mark Uyeda, the SEC’s acting chair, acknowledged the growing concerns about the rule’s broad scope during a speech at an investment conference. He pointed out that the concerns raised may make it difficult for the SEC to move forward with the original proposal. Uyeda directed SEC staff to collaborate with the agency’s crypto task force to explore possible alternatives, including the withdrawal of the rule altogether.

The proposal was introduced under the leadership of former SEC Chair Gary Gensler, who argued that crypto platforms could not be considered qualified custodians because of their operational structures. However, the proposal was met with resistance from Uyeda and Commissioner Hester Peirce, both of whom voiced their concerns about its implications for investment advisers and the broader crypto industry. Uyeda questioned whether advisers could even invest in crypto while complying with the proposed rule, despite ultimately supporting the measure with reservations. Peirce was the only commissioner to vote against it after warning that it will limit the availability of qualified crypto custodians.

Uyeda’s latest statements were made just days after he revealed that he instructed SEC staff to examine options for dropping a separate proposal that would require some crypto firms to register as exchanges. This follows another policy shift from the SEC, which recently rescinded a rule that required financial firms holding crypto assets to record them as liabilities on their balance sheets.

In December, the US President nominated ex-SEC Commissioner Paul Atkins to replace Uyeda as the agency’s chair. A Senate hearing on Atkins' nomination is reportedly scheduled for March 27.

Argentina’s securities regulator recently finalized new rules for virtual asset service providers (VASPs), establishing comprehensive requirements for crypto exchanges and platforms facilitating digital asset transactions. The regulations introduce strict obligations covering registration, cybersecurity, asset custody, money laundering prevention, and risk disclosure. The measures are designed to boost transparency, stability, and user protection in the country’s crypto ecosystem.

Under the new guidelines, VASPs must separate company and client funds, conduct annual audits, and submit monthly reports to the National Securities Commission (CNV). Since 2024, all VASPs operating in Argentina have been required to register with the registry of virtual asset service providers (PSAV), and the latest rules reinforce these requirements. Registrations can also now be revoked for noncompliance, and unregistered operators may face court-ordered bans. Those already registered with the PSAV must comply with the new regulations by July 1, while Argentine-incorporated companies have until Aug. 1, and foreign entities must conform by Sept. 1. CNV President Roberto E. Silva said that noncompliant entities will be banned from operating in the country.

Brazilian lawmakers are considering new legislation that would officially allow employers to pay salaries in cryptocurrencies like Bitcoin (BTC). Federal Deputy Luiz Philippe de Orleans e Bragança introduced the bill, proposing the regulation of crypto payments for wages, remunerations, and labor benefits. The bill legalizes voluntary and partial salary payments in cryptocurrencies while also requiring that a portion of wages still be paid in the national currency, the Brazilian real.

Orleans-Bragança specified that Bitcoin payments cannot exceed 50% of an employee’s salary. The proposed law prohibits full salary payments in virtual assets, except in cases involving expatriates or foreign workers, in accordance with regulations that were set by the Central Bank of Brazil. Independent service providers, however, may receive full compensation in crypto, provided that contractual provisions allow it. Employers paying in crypto must follow exchange rates set by institutions authorized by the central bank.

One of the main goals of the bill is to boost the financial technology sector in Brazil and attract crypto-related investments. Orleans-Bragança argues that the measure enhances economic flexibility by reinforcing the autonomy of workers and employers in shaping contractual agreements. The proposal takes inspiration from global precedents, like Switzerland, Japan, and Portugal as examples of jurisdictions where crypto salary payments have been successfully integrated.