The United States Securities and Exchange Commission (SEC) proposed new rules targeting cybersecurity and privacy whose impact could be felt in the digital assets industry.
The five SEC commissioners voted unanimously in favor of a new rule requiring brokers and asset managers to notify their users of any data breach. Currently, these firms only have to inform customers how they collect, store and use their financial information.
Under the proposed rule, they would have to alert customers whose sensitive information has been accessed by hackers within 30 days. Some states in the U.S. have enforced a variation of this regulation, but this will be the first time it’s adopted at a federal level.
The commissioners also voted to propose new legislation seeking to strengthen cybersecurity defenses. This proposal didn’t receive unanimous support, with “Crypto Mom” Hester Peirce and Mark Uyeda voting against it.
The proposed rule requires clearinghouses, broker-dealers, and other financial institutions to maintain written policies on their cybersecurity defenses and responses. They would have to disclose these policies to their customers, including cybersecurity risks to their operations.
“I believe such disclosure would help investors make informed decisions when deciding which firms they might entrust their finances, data, and personal information,” SEC chair Gary Gensler commented.
The new rules, which also include an expansion of the scope of the Regulations SCI, don’t mention digital assets directly. However, if the systems or institutions covered under their scope interact in any way with a digital asset, these assets would be covered as well.
The ultimate aim is to strengthen the resilience of the American financial industry, Gensler says. Over the past year, some key players in the digital asset industry—from Terra and FTX to Celsius and Genesis—have collapsed, leading to a ‘crypto contagion’ whose effects are still being felt today.
Bryan Daugherty, Director of Public Policy at the BSV Blockchain Association, describes the SEC’s proposed rules as “important steps” that will guarantee company will have measures in place to protect themselves and their clients.
“While I have serious concerns about the risks associated with cryptocurrency, particularly in terms of investor protection, money laundering, and illicit activities, I believe that the underlying blockchain technology has the potential to revolutionize various industries and create new efficiencies. The SEC’s proposed rules on cybersecurity risk management, incident reporting, and disclosure obligations for advisers and funds are important steps in ensuring that companies are taking appropriate measures to protect themselves and their clients. However, I believe that there is still much work to be done in regulating the cryptocurrency market to prevent fraud, protect investors, and ensure market stability,” Daugherty tells CoinGeek.
Recently, the banking industry has seen Silicon Valley Bank (SVB) collapse, dealing a big blow to the startup and cryptocurrency sectors. Signature Bank (NASDAQ: SBNY) and Silvergate Bank—two digital asset-focused entities—have also collapsed within that time, further squeezing the life out of an industry struggling to rebuild after a long winter.
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