The US Securities and Exchange Commission (SEC) has come under fire for its recent proposal regarding the custody of digital assets. JPMorgan, several crypto firms, and a fellow agency have criticized the SEC for its narrow interpretation of the law, which they say could harm the industry.

JPMorgan and Crypto Firms Unite Against SEC

According to reports, JPMorgan Chase & Co. has submitted a letter to the SEC criticizing the regulator’s proposed rule, which would require all digital asset custodians to store the assets with a qualified custodian. JPMorgan reportedly argued that the rule would limit investor choice and hinder innovation in the digital asset space.

In addition to JPMorgan, several other crypto firms have also come out against the proposed rule. Coinbase, the largest US cryptocurrency exchange, reportedly submitted a letter to the SEC stating that the rule would create “unintended and unnecessary barriers to entry” for digital asset custodians.

Furthermore, the Commodity Futures Trading Commission (CFTC), a fellow agency, also criticized the SEC’s proposal. In a separate letter, the CFTC argued that the SEC’s approach could lead to regulatory overlap and confusion for market participants.

Pressure Mounts on SEC to Address Digital Asset Custody

The SEC’s proposal comes at a time when the digital asset industry is gaining increased institutional attention and investment. The regulator has been under pressure to clarify its stance on digital assets, particularly with regard to custody and security.

The proposed rule has been under review by the SEC since last year and is intended to provide a regulatory framework for the custody of digital assets. However, the backlash from industry firms and regulatory agencies may delay or even derail the rule’s implementation.

As the regulator continues to grapple with the complexities of the digital asset space, it remains to be seen how it will balance investor protection with industry growth and innovation.