Andreessen Horowitz (a16z) calls on the US SEC (Securities and Exchange Commission) to modernize its custody regulations for crypto assets.

The crypto VC (venture capital) advocates a principles-based framework where Registered Investment Advisers (RIAs) can self-custody digital assets under defined conditions.

A16Z Asks SEC To Empower RIAs

The crypto VC wrote a detailed article responding to the SEC’s request for information on investment adviser custody. It outlined a path forward that balances investor protection with the realities of managing blockchain-based assets.

“We submitted our response to the SEC’s request for information about IA custody. We are excited to see the SEC take steps towards offering guidance for crypto. Advisory clients deserve for their assets to be safeguarded, so we welcome concrete advice from the Commission,” Scott Walker, Chief Compliance Officer at a16z, announced the firm’s submission on X (Twitter).

He noted that crypto custody presents unique risks and that RIAs need clearer guidance to maneuver those challenges responsibly.

In a16z’s view, existing custody rules designed for traditional securities fall short when applied to crypto. RIAs often find that third-party custodians either do not support the full range of digital asset features or are unavailable.

This compels advisers to weigh legal uncertainty against fiduciary duties. This is particularly true when preserving the economic and governance rights embedded in many tokens. Such rights include protocol voting, staking, and yield generation.

The firm has proposed a five-principle framework solution to reflect crypto’s unique characteristics.

Principles To Empower RIAs, A16Z Shares

Central to its approach is the idea that custody rules should focus on what protections are provided rather than who provides them.

• Eligibility Based on Protections, Not Legal Status

A16z argues that legal status, such as being a federally chartered bank, should not determine eligibility to custody crypto assets. Instead, the SEC should recognize any custodian. This includes state-chartered trust companies or even unregistered entities that can meet strict safeguarding requirements.

Those requirements include annual technical and financial audits, proper asset segregation, encrypted key management, disaster recovery plans, and strong disclosure practices.

The firm emphasizes that crypto custodians must be able to prevent unauthorized transfers. They should also maintain verifiable ownership records and avoid jurisdictions where assets might be swept into bankruptcy estates.

• Substantive Safeguards for Custodians

Another major tenet of the proposal is that RIAs should not be forced to choose between asset security and client value. Due to technical constraints or compliance concerns, current custodians often limit access to staking or governance features.

• Enable Exercise of Crypto Rights

A16z contends that RIAs should have permission to exercise those rights on behalf of clients. In cases where a custodian cannot support them, temporarily self-custody assets to unlock those features should not be considered a regulatory breach.

• Best Execution Flexibility

The firm also calls for greater flexibility in how RIAs pursue best execution. Transferring crypto to a trading venue for optimal pricing should not constitute a withdrawal from custody. This, however, is contingent on the adviser taking appropriate steps to vet the platform’s security and integrity.

• Self-Custody as a Last Resort

A16z maintains that third-party custody should remain the default. However, the crypto VC believes RIAs should self-custody when no viable alternatives exist or when doing so is necessary to fulfill their fiduciary responsibilities.

Such arrangements would be subject to the same auditing and disclosure standards as third-party custodians.

“Registered Investment Advisers investing in crypto assets have suffered from both a lack of regulatory clarity and limited viable custodial options. What the industry needs is a principles-based approach to solve this critical issue for professional investors,” the firm wrote in its post.

As the SEC grapples with crypto’s place in the regulatory arena, a16z’s comprehensive proposal may offer a roadmap for reform that protects investors while unlocking the full potential of tokenized finance.

Meanwhile, this report comes only months after the US SEC SEC announced Staff Accounting Bulletin (SAB) No. 122. This move effectively canceled the previous guidance under SAB 121, which discouraged banks from holding Bitcoin in custody.

The move allowed banks and traditional financial (TradFi) institutions to offer crypto services without significant regulatory hurdles.

Similarly, a landmark decision only a month ago allowed banks to offer crypto custody and stablecoin services without prior approval, streamlining digital asset integration.

However, amid the push for banks and RIAs to gain more crypto flexibility, strong risk management controls remain essential, aligning with the Office of the Comptroller of the Currency’s (OCC) regulatory guidelines.

“The OCC expects banks to have the same strong risk management controls in place to support novel bank activities as they do for traditional ones,” said Rodney E. Hood, the acting Comptroller of the Currency.  

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A financial analyst has publicly criticized the use of global M2 money supply data to predict Bitcoin (BTC) price movements, calling such analyses mathematically unsound and misleading.

The criticism comes amid a surge in the global M2 money supply to an all-time high. Several analysts are forecasting similar trends for BTC.

Is Global M2 Money Data a Reliable Predictor for Bitcoin Price Movements?

The analyst, known as TXMCtrades, shared his thoughts on X (formerly Twitter). He specifically pointed to a chart by macro investor Raoul Pal that compared Bitcoin’s price to global M2.

TXMCtrades argued that charting global M2 daily or weekly is fundamentally flawed due to the inconsistent update frequencies of the underlying data. According to him, doing so distorts the information by amplifying short-term fluctuations instead of providing an accurate, long-term trend.

“People, you can’t create a daily or weekly time series of “Global M2” when the United States is only updating M2 on a weekly basis and all others are monthly!” the post read.

He explained that many countries have yet to update their figures beyond February, creating significant gaps in the dataset. TXMCtrades contended that this inconsistency results in a metric that largely reflects foreign exchange (FX) fluctuations rather than actual money supply dynamics.

“You’re looking at an M2 weighted inverse dollar exchange rate 95% of the time. Be better at math!” he added.

He also highlighted broader concerns about the misuse of global M2. The analyst stressed that China, which constitutes 46% of global M2, is the only major economy with a broad money supply above its post-COVID peak in dollar terms. 

“They are currently trying to ease out of an ongoing multi-year debt deflation and doing a pretty shit job of it. Their M2 goes straight up,” TXMCtrades remarked.

Meanwhile, US M2 remains below its 2022 peak. In addition, the analyst emphasized that it is growing at its slowest pace since Bitcoin’s inception, excluding the 2022-2024 period. This suggests that the US is not experiencing rapid money supply growth, which could impact inflation or other economic trends.

This disparity, TXMCtrades argues, further undermines the reliability of global M2 as a predictor of Bitcoin price movements. The analyst also disputed the use of “random offsets” to align global M2 with Bitcoin price movements, a method employed by several analysts.

For instance, Raoul Pal has suggested a 12-week lag between global M2 and Bitcoin’s price. Meanwhile, Colin Talks Crypto proposes a 15.4-week lag. Meanwhile, Mr. Wall Street estimates the lag to be between 10.7 and 15 weeks. Some have even extended the M2 correlation to predict altcoin prices, such as Solana (SOL).

“SOL has been following Global M2 Money Supply (+100 days) its last two legs up. If this continues, SOL is set to pump massively within the next 2 weeks,” analyst Curb posted.

Nonetheless, the analyst stated that offsets are often arbitrary and don’t reflect the actual dynamics of money supply or asset prices.

“Money is money, it doesn’t have a wait time,” he claimed.

The analyst suggested that such models are overfitted to recent historical data and lack a strong foundation for forecasting. Lastly, TXMCtrades called for greater rigor in financial analysis. He urged analysts to “stop proliferating scammy analysis” and adopt more mathematically sound approaches to understanding cryptocurrency price dynamics.