Paul Grewal titled SEC's proposal misguided.
Coinbase's Chief Legal Officer (CLO), Paul Grewal, calls for SEC to revise its proposed regulation on the responsibilities of registered investment advisers (RIAs).
In the letter sent on May 8th, Grewal argues that the current proposal neglects the crypto asset class and unfairly targets it based on securities-related custodial practices.
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On top of that, Grewal stresses the need for the proposed custody obligations to adapt to the ever-changing landscape of investments, ensuring that all asset classes, including cryptocurrencies, receive adequate protection.
It is worth noting that as a recognized "qualified custodian," Coinbase Custody Trust Company takes on the responsibility of protecting RIA clients' assets against potential risks such as bankruptcy or cyberattacks.
RIAs are companies that advise clients on securities investments and may even manage their investment portfolios. The firms must register with either the SEC or state securities administrators, depending on the total value of their assets under management.
Grewal's critique of the proposed rulemaking, known as "Safeguarding Advisory Client Assets, Proposed Rule 223-1," called the proposal misguided. Therefore, Coinbase CLO urged SEC's revision along with staff guidance.
In the letter, Coinbase CLO emphasized the necessity of safeguarding all asset classes, especially cryptocurrencies, which have not been previously classified as securities.
Grewal not only criticized SEC's proposal but also put forth several suggested revisions. These include recognizing state trust companies and other state-regulated financial institutions as qualified custodians, allowing limited exposure to non-qualified custodians, and lifting the ban on RIA client trades on crypto exchanges that aren't qualified custodians.
It is believed that SEC should respond to the Coinbase CLO letter this week. However, Coinbase is also waiting for SEC's comments on a lawsuit filed in April 2022, urging the court to force the SEC to clarify its stance on a previously submitted petition.
Several crypto advocates have also criticized SEC's proposed custody rule changes.
