Regulators in the US and UK have made swift moves against the cryptocurrency sector in 2023.
In the United States, the Securities and Exchange Commission (SEC) set things in motion by suing Kraken for violations of securities law.
Then, the New York Department of Financial Services (NYDFS) this week ordered Binance’s trading partner Paxos to stop minting all BUSD stablecoins, the third-largest stablecoin by market capitalization, effective immediately.
It now appears that the SEC is working on a proposal to prohibit, or at least make it extremely difficult, cryptocurrency companies to act as custodians of client assets.
According to a Bloomberg report, the proposed rule could force private equity firms and hedge funds to rethink their relationship with the generally unregulated cryptocurrency sector.
Qualified custodians are responsible for safely keeping client funds, but numerous controversies throughout 2022 exposed the inherent risk factor of the procedure.
Celsius Network, BlockFi, FTX, Genesis and a host of other collapsed crypto companies involved in custody practices, resulting in billions in losses for users.
Financial institutions may be subject to surprise audits under proposed laws.
UK Crypto ATM Crackdown
In the UK, the Financial Conduct Authority (FCA) has reaffirmed its position that all crypto ATMs operating in the country do so illegally.
The FCA has gone so far as to partner with West Yorkshire Police Digital Intelligence and Investigation Unit to crack down on unregistered crypto ATMs, which allow customers to buy or convert funds into crypto assets.
Czech company General Bytes operates 24 ATMs across the UK, according to Coin ATM Radar, including one in Sheffield and two in Manchester.
General Bytes could not be reached by phone for comment.
“We will continue to identify and disrupt unregistered crypto businesses operating in the UK,” said Mark Steward, the FCA’s executive director of compliance and market supervision.