Aaron Kaplan is the co-CEO of Prometheum Inc. Its affiliates Prometheum ATS and Prometheum Capital offer and end-to-end, blockchain-enabled ecosystem for the trading (Prometheum ATS) and clearance, settlement, and custody of digital asset securities (Prometheum Capital).
” related to safeguarding clients’ crypto assets. While the amount may seem small, the implications for the Registered Investment Advisor community, digital asset industry and custodians are significant.marks a pivotal moment in how digital asset custody is and will be regulated, and signals the SEC’s intention to bring crypto custody further under federal jurisdiction.
The message is clear: RIAs managing digital assets must take immediate steps to align with the SEC’s custody standards or face similar disciplinary actions., “A qualified custodian generally is a federal or state-chartered bank or savings association, certain trust companies, a registered broker-dealer, a registered futures commission merchant, or certain foreign financial institutions .” Many non-depository trust companies claim on their websites that they are “qualified custodians.
Ultimately, the strength of any custodial license is only as strong as regulators’ abilities to oversee the actions of the custodian, putting the burden of due diligence squarely on the RIA.Custody standards, and the licenses that uphold them, are changing. Review current relationships to understand the requirements your custodial partner is required to follow, and the strength of the associated regulatory body.
While the Galois Capital case highlights the potential pitfalls of improper custody practices, it also presents an opportunity for RIAs. As the SEC clarifies its expectations around digital asset custody, firms that proactively adopt the “gold standard” of custody can differentiate their digital asset offerings to clients while reducing the risk of SEC enforcement action.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.
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