In a move that has been dubbed the “war on crypto,” the United States Securities and Exchange Commission (SEC) has proposed to tighten its rules around crypto custody. However, this proposal has been met with fierce opposition from at least two prominent industry proponents, the Blockchain Association and Web3 venture capital fund Andreessen Horowitz.

The proposed amendment to the SEC’s custody rule has been criticized by the Blockchain Association, which has claimed that the rule would “drastically curtail investment in digital assets.” Marisa Tashman Coppel, a policy lawyer at the association, has gone as far as to call the current form of the rule “unlawful.” Meanwhile, Andreessen Horowitz has also sent a similar letter to the SEC.

The proposed changes to the SEC’s custody rule would require that any broker-dealer that holds digital securities for customers must use a qualified custodian. This has been met with criticism from those who believe that it will stifle innovation and investment in the industry.

The Blockchain Association has argued that the proposed rule will create an unnecessary burden for companies that are already operating in compliance with existing laws and regulations. They have also claimed that the SEC has not provided sufficient evidence to justify the proposed changes.

In their letter to the SEC, Andreessen Horowitz has argued that the proposed rule would impose “unnecessary burdens and costs” on the industry. They have also claimed that the proposed changes would not improve the safety and soundness of the industry.

The opposition to the proposed rule is not surprising given the growing importance of digital assets and the increasing number of investors who are looking to invest in them. The SEC’s proposed rule has been criticized for being overly restrictive and could lead to a slowdown in innovation and investment in the industry.

Despite the opposition, the SEC has stated that it believes the proposed rule is necessary to protect investors and ensure the integrity of the securities markets. The SEC has also noted that it is open to feedback from industry stakeholders and will take all comments into consideration before making a final decision.

As the “war on crypto” continues, it is likely that we will see more opposition to regulatory proposals that are seen as overly restrictive. However, it is important to remember that regulations are necessary to protect investors and ensure the safety and soundness of the industry.

In the end, it will be up to the SEC to strike a balance between protecting investors and allowing for innovation and investment in the digital asset space. Only time will tell if the proposed rule will be implemented in its current form or if changes will be made based on feedback from industry stakeholders.