### The capacity of cryptocurrency exchanges to ensure the safety of digital assets held in their custody has been questioned by Gary Gensler, the Chair of the Securities and Exchange Commission (SEC) in the United States.

Gensler commended a recently proposed legislation that requires investment advisers to look for certified custodians for the protection of assets, including cryptocurrency, during his remarks at an Investor Advisory Committee meeting. The current protection procedures, which have been deemed insufficient in the wake of recent crypto bankruptcies, are "much enhanced" by new guidelines, he said.



Gensler went on to warn that simply claiming to be a qualified custodian does not necessarily mean an exchange can be trusted to safeguard investors' digital assets. This statement has raised concerns among the crypto community, as it may suggest that investment advisors will shy away from crypto exchanges in favor of more traditional custodians. Gensler's comments are part of his wider agenda to regulate the crypto industry and ensure that it operates within existing financial frameworks.



<blockquote className="twitter-tweet">Of course <a href="https://twitter.com/GaryGensler?ref_src=twsrc%5Etfw">@GaryGensler</a> says exchanges aren’t “qualified custodians.” That’s b/c <a href="https://twitter.com/jpmorgan?ref_src=twsrc%5Etfw">@jpmorgan</a> <a href="https://twitter.com/GoldmanSachs?ref_src=twsrc%5Etfw">@GoldmanSachs</a> <a href="https://twitter.com/MorganStanley?ref_src=twsrc%5Etfw">@MorganStanley</a> <a href="https://twitter.com/Fidelity?ref_src=twsrc%5Etfw">@Fidelity</a> <a href="https://twitter.com/BlackRock?ref_src=twsrc%5Etfw">@BlackRock</a>, etc are only “qualified.” Exactly what <a href="https://twitter.com/cvpayne?ref_src=twsrc%5Etfw">@cvpayne</a> and I’ve discussed on his show. Crush the exchanges so incumbents can get a bigger slice. <a href="https://t.co/Z2PXwtUEIU">https://t.co/Z2PXwtUEIU</a>— John E Deaton (@JohnEDeaton1) <a href="https://twitter.com/JohnEDeaton1/status/1631507802056278020?ref_src=twsrc%5Etfw">March 3, 2023</a></blockquote> 



While there is no denying the importance in securing custody for your own digital assets, Gensler's statement has also sparked fears that his regulatory efforts will stifle innovation in the crypto industry. The crypto community has expressed concern that increased regulation will lead to a loss of decentralization and the adoption of a more centralized approach to crypto trading and investment. There are also concerns that Gensler's efforts to regulate the crypto industry may have unintended consequences, such as driving innovation and investment overseas.



To sum up, while secure custody is unquestionably important for the protection of digital assets, Gensler's words have prompted concerns among the crypto community that his regulatory measures may hinder innovation and have unforeseen repercussions. Regulators must find a middle ground between the competing interests of safeguarding investors and encouraging innovation in the rapidly developing cryptocurrency sector.

The capacity of cryptocurrency exchanges to ensure the safety of digital assets held in their custody has been questioned by Gary Gensler, the Chair of the Securities and Exchange Commission (SEC) in the United States.

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