SEC's Crypto Custody Proposal Leaves DeFi Questions Unresolved
Bitwise General Counsel Johanna Collins-Wood welcomed the SEC's new crypto custody proposal, but noted that decentralized finance (DeFi) questions remain unresolved. The proposal, which was published in the Federal Register, aims to provide a clear regulatory framework for the custody of crypto assets. Collins-Wood said that the framework 'thoughtfully addresses problems crypto asset managers have faced since 2017.'
She specifically highlighted the recognition of state trust companies as crypto custodians, clarification of trading authority and standing letters of authorization, and permission to keep records on-chain as 'practical changes that provide practical solutions.'
However, Collins-Wood expressed a point of difference, stating that the proposal rests on an assumption that does not hold across the entire crypto industry. The framework was built around wallets and client addresses, which does not describe how DeFi works.
The SEC is inviting discussion on this gap through questions 171 to 180 covering DeFi, staking, and receipt tokens. Comments are due 60 days after publication in the Federal Register.