Oct. 20, 2023
The proposed SEC custody rules may not adequately account for future technological advancements in the digital asset space. Here are some ways this could be an issue: New cryptography techniques - New cryptographic methods like sharding, zero-knowledge proofs, etc. could enhance security of digital assets in ways current rules don't anticipate. Hardware wallets - Advanced hardware wallets may offer better private key protections than software wallets, but may not be reflected in the rules. Multi-party computing - Technologies like multi-party computation could allow better security through distributed trust, but aren't incorporated into current proposals. tokenized securities - Tokenized traditional securities like stocks and bonds are emerging, but not fully considered in the custody rules focused on cryptocurrencies. Automated protocols - Smart contract protocols like DeFi are automating custodian functions, but human custodians are still the assumption in the rules. Quantum computing - Quantum computers may one day be able to break current cryptographic standards relied on in digital asset security.