SEC proposal could make it harder for crypto firms to be qualified custodians - report

The U.S. Securities and Exchange Commission has reportedly prepared a draft proposal that could make it hard for hedge funds, private equity firms and pension funds to work with cryptocurrency-related firms. The rule changes could make it difficult for crypto companies to become qualified custodians, which would allow them to hold client assets for money managers, Bloomberg reported , citing people aware of the matter. The SEC will propose the rule changes on Wednesday, which would then have to be approved by the five-member commission before they are put out for public comment. The regulator will then vote to finalize the proposal. The development comes at a time when the crypto sector has been grappling with increased regulatory scrutiny following a string of bankruptcies last year. New York's financial watchdog ordered Paxos Trust to stop minting BUSD ( BUSD-USD ) tokens, while the SEC is reportedly looking to sue the stablecoin issuer. The SEC also directed crypto exchange Kraken to shut its staking platform over its failure to register the service .