SEC Targets Crypto Custody with Asset Coverage Scrutiny

The Securities and Exchange Commission (SEC) is increasingly scrutinizing how cryptocurrency exchanges and custodians manage their asset coverage, essentially turning crypto custody into a fight over who has the right to hold assets.

This development marks a significant shift in regulatory focus from ensuring that exchanges operate as registered broker-dealers to assessing whether they have sufficient assets to cover customer holdings.

According to sources familiar with the matter, the SEC is concerned about potential asset coverage mismatches between exchanges and their customers. This has led to increased scrutiny of custodianship practices among cryptocurrency players, particularly in regards to non-fungible tokens (NFTs).