Kraken CEO and creator Jesse Powell has criticized the U.S. Securities and Exchange Commission (SEC) for its recent crypto custody regulations.

On February 15th, a 4-1 vote was taken by the Securities and Exchange Commission to propose major changes to federal regulations that would extend custody rules to include assets like cryptocurrency and require companies to gain or maintain registration in order to hold these assets for their customers.

In response, Powell jokingly claims that the SEC wouldn’t truly let anybody to register. If passed, the proposed changes to federal custody laws would apply to all of a financial adviser’s clients’ assets, not just those held by the advisor.

Even while the amendment doesn’t name any specific cryptocurrency businesses, Gensler has warned in a separate statement that just because a platform for buying and selling cryptocurrencies or lending them out does not make them a qualified custodian. 

Jesse Powell also pointed out that separating the custodian from the exchange does not actually provide any further protection for American investors from the custodian.

The most recent iteration of federal restrictions applies only to assets such as money or securities and mandates that investment advisers such as Fidelity or Merrill Lynch store such assets with a bank that is either federally or state-chartered, with a few very narrow exemptions.

The plan would be the SEC’s most direct attempt to date to rein in even registered cryptocurrency exchanges that have extensive institutional custody programs servicing high-net-worth people and businesses that house investor assets, such as hedge funds or retirement investment managers.

Other federal agencies aggressively prevent custodians like banks from storing client crypto assets, thus, this action presents a new danger to crypto exchange custody programs.