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SEC invites public feedback on custody of digital assets amid Ripple lawsuit

SEC invites public feedback on custody of digital asset amid Ripple lawsuit

The U.S. Securities and Exchange Commission (SEC) is seeking public opinion on the custody of digital asset securities by broker-dealers. In a press release, the agency states that the feedback aims to encourage innovation around the application of its regulations to digital asset securities.

The SEC also invites views on how to regulate broker-dealers when holding digital assets and recommending them to investors. In general, the SEC hopes to gather insight into the evolving standards and best practices of digital assets custody.

At the same time, SEC also offered relief from enforcement actions for up to five years. The relief targets broker-dealer firms that have obtained and maintained physical possession or control of customer fully paid and excess margin digital asset securities. The commission states that: 

“These circumstances, among other things, include that the broker-dealer limits its business to digital asset securities, establishes and implements policies and procedures reasonably designed to mitigate the risks associated with conducting a business in digital asset securities, and provides customers with certain disclosures regarding the risks of engaging in transactions involving digital asset securities.”

SEC’s lawsuit on Ripple over XRP registration

The SEC statement comes at a time the industry has been calling for clarity on custody of digital assets. The commission has invited all interested parties to share their views. 

The request for feedback comes after SEC filed a lawsuit against Ripple over the handling of the XRP token. The SEC argues that XRP has always been a security and Ripple failed to register it with the commission. Ripple which facilitates cross-border transactions began the sale of XRP in 2012.

The suit was filed against Ripple CEO Brad Garlinghouse and executive Chris Larsen. Ripple maintains that XRP should be classified as a currency, not a security just like Bitcoin.

Following suit, the price and market capitalization of XRP has crashed significantly. With the news about going public on December 22, the market cap dropped roughly from $26 billion to $12 billion by press time as per the data provided by Coinmarketcap.com. The asset is currently trading at $0.27 after dropping by over 52% in the last 7 days. 

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