Congressman Davidson accuses the SEC of blocking self-custody of digital assets, undermining Bitcoin and crypto investors.
Davidson highlights Grayscale's legal victory, calling the SEC's delayed response a rebuke of its regulatory actions.
Rising inefficiencies in Bitcoin exchange-traded products are linked to the SEC's restrictive custody rules, claims Davidson.
U.S. Congressman Warren Davidson has raised concerns over the U.S. Securities and Exchange Commission’s (SEC) approach to Bitcoin custody under the leadership of Chairman Gary Gensler.
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He pointed to the challenges facing Bitcoin and digital asset markets, particularly regarding the SEC's interference with investors' ability to manage their own holdings. Davidson claimed that the SEC has taken deliberate steps to undermine the self-custody of digital assets, preventing consumers from securely holding and transferring their Bitcoin and other cryptocurrencies.
Concerns Over SEC's Custody Restrictions
Davidson noted that Bitcoin alone holds a market capitalization exceeding $1 trillion, signaling high consumer confidence in the asset. However, he criticized the SEC's actions in delaying Grayscale’s efforts to convert its Bitcoin Trust into a Bitcoin Exchange Traded Product (ETP).
He explained that the D.C. Circuit Court ruled in favor of Grayscale in August 2023, stating the SEC had violated the Administrative Procedures Act in denying Grayscale’s application. Yet, the SEC delayed approval until January 2024, which Davidson described as a rebuke of the regulator’s actions. Furthermore, Davidson emphasized how the SEC’s handling of the “Debt Box” case highlighted ongoing misconduct, claiming courts continue to find fault with the agency's decisions.
Impact on Market Confidence
Davidson also commented on the broader implications for market participants. He stated that despite the SEC's actions, the Bitcoin market has continued to grow, with consumers believing in Bitcoin’s value as a secure method of storing wealth. He added that the ability to transfer Bitcoin peer-to-peer in a permissionless manner is one of the fundamental principles outlined in Bitcoin’s original whitepaper.
However, Davidson criticized the SEC for allegedly undermining this freedom by attempting to push custody solutions into the hands of third parties under its control. He argued that these restrictions ultimately harm individual investors who prefer to hold their assets securely without relying on intermediaries.
SEC's Custody Rules and Broader Challenges
During a recent discussion, Davidson questioned SEC’s efforts to regulate custodianship through broker-dealers. He highlighted the current framework’s limitations, including the exclusion of major custody banks from offering services related to digital assets like Bitcoin.
In response, market participants raised concerns about the rising costs and inefficiencies caused by these regulatory hurdles, notably when handling exchange-traded products in the U.S.
