Coinbase has recently filed a qualified custodian (QC) proposal comment letter to the US Securities and Exchange Commission. The comment is in response to the commission’s February 15 proposal, which is focused on updating the investment adviser custody rule. Coinbase chief legal officer Paul Grewal also recently put out a tweet to stress the same subject.
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. 7/7— paulgrewal.eth (@iampaulgrewal) May 9, 2023
Grewal highlighted the SEC’s recent proposal, which suggested revisions to a rule requiring registered investment advisors (RIAs) to hold client assets at qualified custodians (QCs). Grewal mentioned that the entire qualified custodian (QC) proposal comment letter is misguided and suggested ways to improve it.
The Coinbase CLO also talked about the other possibility in case the SEC’s proposal is adopted, stating that Coinbase is confident that the Coinbase Custody Trust Company will remain a QC and already agrees with the spirit of the proposal.
Like other recent SEC actions, this proposal unnecessarily singles out crypto and makes inappropriate assumptions about custodial practices based on securities markets.
Grewal summarized a few highlights from Coinbase’s proposal to the SEC, with the first one focusing on defining state trust companies and other state-regulated financial institutions as QCs. Secondly, Grewal highlighted that the SEC’s proposal could ban RIAs from trading on non-QC crypto exchanges. This, according to him, wouldn’t benefit RIAs or their clients.
Additionally, Coinbase’s proposal includes suggestions on how to avoid disrupting and working commercial realities between custodians and their clients. Grewal also showed his appreciation for having the chance to weigh in.