"At first I felt like I was safe, but now my stomach is cramping again."
During a meeting of the Investor Advisory Committee, the Chairman of the Securities and Exchange Commission (SEC) of the United States (US) Gary Gensler instructed investment advisers to find qualified custodians* to store cryptocurrencies.
*the party responsible for protecting funds or crypto wallet holdings from theft or loss
According to Gensler's proposed rules, crypto exchange companies cannot be considered safe at all.
Previously, Gensler had made a similar statement when he condemned Kraken's crypto staking service while Coinbase was proud of his company's robust custodian service.
However, crypto companies are not necessarily qualified custodians if they themselves claim they are, Gensler said while talking about the subject of qualified custodians in the crypto market.
Citing the reference to the custodial rules adopted in 2009, the SEC stated that the rules also cover a large number of cryptocurrencies and that advisers are required to safeguard investor funds through a qualified custodian.
Among the traditional companies that have the potential to be custodians are banking institutions, trust companies and securities brokers.
Despite that, Coinbase has started offering the service to prevent digital assets such as Bitcoin (BTC) from being stolen or hacked.
Meanwhile, Congress gave the SEC new powers to make sure investment advisers don't misuse or act irresponsibly with their clients' money.
