Institutional cryptocurrency financial services firm Galaxy Digital (NASDAQ ticker: GLXY) pointed out that there is a structural contradiction between the US Securities and Exchange Commission (SEC)'s custody regulations and the demand for DeFi. Galaxy Digital explained, "Many registered investment advisors (RIAs) are struggling to comply with the SEC's custody regulations while also meeting clients' DeFi investment demands." It added, "The current regulations require client assets to be held with qualified custodians, effectively excluding self-custody methods, and also make it difficult to directly participate in DeFi strategies through traditional financial accounts." It further emphasized, "Building a principles-based regulatory framework that includes MPC-based key management, governance control systems, third-party audits, on-chain transparency, and robust protocol due diligence mechanisms is a realistic solution."
