• The United States Securities and Exchange Commission (SEC) is investigating investment advisors for potentially offering digital asset custody to their clients without meeting proper criteria.
• The investigation follows the implosion of FTX and seeks details from advisers about the steps taken to assess custody for platforms.
• Three unnamed sources reported that the SEC is targeting investment advisors for potentially not following the rules around the custody of clients’ digital assets.

The United States Securities and Exchange Commission (SEC) is actively pursuing an investigation into investment advisors offering digital asset custody to their clients without meeting proper criteria. This is in light of the recent implosion of FTX, a cryptocurrency exchange.

The SEC enforcement staff is actively seeking details from the investment advisors in question and is requesting information regarding the steps taken by the advisors to assess custody for crypto platforms, including FTX.

The investigation has not been made public yet, however, three unnamed sources revealed to Reuters that the SEC is targeting investment advisors for potentially not following the rules around the custody of clients’ digital assets.

The SEC is currently examining the intersection of crypto and traditional finance and wants to ensure that investors are protected from any potential risks associated with digital asset custody. The regulator is looking to ascertain whether investment advisors are taking the necessary steps to identify, manage, and mitigate risks when offering digital asset services to their clients.

The SEC has also indicated that it is closely monitoring investment advisers’ activities in the crypto space and is prepared to take enforcement actions against those that fail to abide by the rules. The Commission has already taken action against several entities for failing to register their cryptocurrency activities as well as for failing to properly disclose their activities.

It is clear that the SEC is taking a proactive approach to regulating the crypto space and is committed to ensuring that investors’ interests are protected. The regulator is now targeting investment advisors who may not be following the rules around digital asset custody and is sending a strong signal that such activities will not be tolerated.