SEC Chair Gary Gensler Questions Crypto Exchanges as Qualified Custodians in 2025

“Claiming to be a qualified custodian doesn’t guarantee a crypto trading platform meets the standard,” stated SEC Chair Gary Gensler.

In 2024, U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler has once again scrutinized the role of cryptocurrency exchanges, casting doubt on their qualification as custodians for investment advisory funds.

Key Highlights

• SEC Chair Gary Gensler expresses skepticism about crypto exchanges qualifying as custodians for investment advisors.
• Comments follow a recent SEC rule update expanding custody requirements to include cryptocurrencies.
• Raises critical questions about the reliability of crypto platforms in safeguarding investors' assets.

Gensler’s remarks, delivered during a virtual public meeting, came after the SEC commissioners’ February 15, 2024 vote to broaden asset custody regulations to encompass digital assets. Approved by a 4-1 margin, the new rules require investment advisors to entrust qualified custodians with clients’ assets, including cryptocurrencies. These regulations aim to strengthen protections for investors holding stocks, bonds, mutual funds, and now digital currencies.

“Considering the operational models of most crypto trading and lending platforms, investment advisors cannot currently depend on them as qualified custodians,” Gensler emphasized. “To clarify: a platform’s claim of qualified custodian status does not confirm compliance.”

The SEC Chair pointed to recent high-profile crypto bankruptcies as evidence underscoring the urgency for enhanced custody safeguards. “When crypto platforms collapse, investors’ assets frequently become entangled in bankruptcy proceedings, leaving investors vulnerable,” he explained.

Gensler’s statements introduce further complexity for institutional investors and advisors navigating cryptocurrency custody. The distinction between exchanges that meet qualified custodian standards and those requiring regulatory compliance remains unclear.

Notably, Coinbase (COIN) maintains confidence in its compliance stance. A company spokesperson stated, “Coinbase Custody Trust Company operates as a qualified custodian under the SEC’s Custody Rule, and recent proposals do not alter this status. CCTC is a regulated institutional custodian, chartered under the New York State Department of Financial Services.”

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