SEC Extends Olive Branch to Broker-Dealers Handling Digital Assets
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The U.S. Securities and Exchange Commission (SEC) released a statement on Wednesday requesting comment on the custody of digital assets by special purpose broker-dealers.
The move appears to be a response to the official charges recently brought on Ripple executives. The SEC, according to the statement, seeks to “encourage innovation” regarding digital asset securities.
The Commission will reportedly grant a grace period of five years to broker-dealers who have handled digital asset securities:
“…a broker-dealer operating under the circumstances set forth in the statement will not be subject to a Commission enforcement action…”
Several crypto exchanges have rushed to delist XRP in the US. And notable hedge fund, Bitwise, has already liquidated all of its XRP (3% of the fund) and moved into other crypto assets.
SEC Commissioner Hester Peirce said the announcement was a baby step, but others called the move “1 step forward, 12 steps back.”
Ripple to SEC: We Saw It Coming
Ripple CEO Brad Garlinghouse staunchly criticized the uncertain regulatory landscape back in October. Garlinghouse even hinted that Ripple could relocate to a more favorable jurisdiction outside of the US.
While the SEC did not specifically name any companies in the release, some onlookers speculate that the timing is not coincidental. Is the SEC trying to mitigate the effects of its lawsuit with Ripple?
An additional quote from an official supplementary document reads:
“The Commission envisions broker-dealers performing the full set of broker-dealer functions with respect to digital asset securities – including maintaining custody of these assets – in a manner that addresses the unique attributes of digital asset securities and minimizes risk to investors and other market participants.”
XRP Tanks on the Day
The wordy release continues to raise questions regarding the lack of regulatory clarity in the country. The Commission appears stuck between an innovation rock and a protective hard place:
“…the Commission is requesting comment to provide the Commission and its staff with an opportunity to gain additional insight into the evolving standards and best practices with respect to custody of digital asset securities.”
XRP continued to receive heavy offers heading into the late US afternoon (ET). And investors returned to the relative safety of US dollars. At the time of writing, the token was down some 40% to $0.27 per unit.
What is perhaps clear, however, is as the issuer of XRP, Ripple likely won’t escape the clutches of the heavy-handed US regulator. Those who custody its token, at least for the moment, may breathe a sigh of relief.
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