The U.S. Securities and Exchange Commission (SEC) is investigating traditional Wall Street investment advisers that may be offering digital asset custody services to clients without the proper qualifications.

The SEC's investigation has been ongoing for several months but has accelerated following the collapse of the crypto exchange FTX, according to a Reuters report, citing sources.

The SEC's investigations are not public, and the recent revelation suggests that the agency is closely monitoring traditional investment firms that operate in the digital asset space.

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The investigation is focusing on whether registered investment firms have met the rules and regulations surrounding the custody of client crypto assets.

By law, investment advisory firms are required to be "qualified" to offer custody services to clients and must comply with the custodial safeguards outlined in the Investment Advisers Act of 1940.

This is a significant issue for investment advisers as they must ensure they are compliant with the regulations set by the SEC.

This is not the first time that the SEC has shown its interest in the digital asset space. On November 15, 2022, the Wall Street Blockchain Alliance (WSBA) wrote a letter to the SEC to seek clarity on what potential amendments, if any, apply to the “Custody Rule” as it pertains to digital assets.

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