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The Friday roundtable included executives from firms including Anchorage Digital Bank, Fidelity Digital Assets, Kraken, BitGo, Exodus, Fireblocks and Copper Technologies. They outlined the legal and operational roadblocks to offering crypto custody solutions that comply with federal securities laws.
Crypto custody refers to how the digital assets are held. Some investors prefer to custody their own holdings with private keys stored on hardware wallets, or "cold storage," versus using crypto brokerage firm — "hot wallets" — and other third-party options.
A lack of clear regulatory guidelines makes it difficult to know which options are legal, and also creates challenges to providing safeguards in a market that's seen its share of hacks.
"A regulatory approach should recognize the differences across qualified custodians exist for some crypto assets," Peirce said, at Friday's event. "But for others, self custody might be the safer option."
The SEC is weighing revisions to its controversial custody rule, first proposed under Gensler, which many in the crypto industry argue was unworkable for blockchain-based assets. The proposal stalled, and Friday's roundtable signals renewed interest in finding a compromise.
Still, tensions remain between the need for investor protections and the practical realities of securing decentralized assets.
"The Commission must grapple with these issues," Peirce said. "If we fail to do so, we prevent regulated entities from serving their customers."
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