Oct. 20, 2023
the proposed SEC custody rules do not provide clear guidelines for how its enforcement programs will innovatively respond to future technological advancements in the digital asset space. Some ways the SEC could address this: Proactive tech monitoring - Establish internal teams or programs to actively monitor and assess emerging custody technologies and models. Tech expertise - Hire more staff with specialized expertise in cryptography, blockchain analytics, AI, and other relevant disciplines. Advisory committees - Create technology advisory councils with outside experts to evaluate innovations. Regulatory sandboxes - Develop mechanisms to pilot and test oversight of new technologies before full deployment. Agile policymaking - Commit to rapidly issuing guidance in response to substantive tech developments. Cyber coordination - Enhance partnerships with law enforcement cyber agencies to take advantage of shared capabilities. Data analysis - Leverage advanced data analysis tools to quickly identify and respond to new cyber risks. Risk-based enforcement - Use predictive models and indicators to target enforcement resources at highest-risk emerging technologies. Staff training - Require ongoing training to continuously upgrade enforcement staff capabilities along with the technology. Codifying a flexible, innovation-friendly framework for responding to custody tech advancements will help keep SEC oversight effective and nimble in a rapidly evolving crypto industry.