Crypto & The SEC: A Kafkaesque Nightmare?

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Ah, the SEC. Those tireless guardians of our financial well-being… or so they would have us believe. Now, they’ve deigned to issue “guidance” – a grandiose term, isn’t it? – regarding the application of existing laws to these… cryptocurrencies. As if law itself wasn’t already a sufficiently labyrinthine mess. 🙄 A document, they call it. I call it a monument to bureaucratic self-importance.

This “comprehensive guidance,” birthed from the depths of the Division of Trading and Markets, aims to enlighten (or perhaps further confuse) broker-dealers, transfer agents, and the poor souls operating these “trading platforms” regarding the handling of these digital phantoms. A roadmap, they say. More like a convoluted map leading directly into the abyss.

The Illusion of Security: Custody of Digital Ghosts

Back in 2020, they offered a “safe harbor,” a fleeting promise of protection for brokers who jumped through hoops of regulation. A rather patronizing gesture, really! As if following rules could truly shield one from the chaotic void of the market. Of course, brokers can still dabble with crypto, adhering to the same tired, ancient rules. How comforting. 😒

They permit this… “in-kind” business, this swapping of ephemeral tokens for ETF shares. But should a broker actually hold these digital baubles – Bitcoin, Ether, the very essence of speculative fever – they are, naturally, responsible for the ensuing risks. As if they weren’t stressed enough already! A heavy burden indeed, for those who profit from the anxieties of others.

A Warning, or a Subtle Threat?

And what of the investor, that pitiable creature driven by hope and fear? SIPC, the supposed safety net, only protects “securities” – those officially recognized and registered by the SEC. Should your crypto turn out to be an unregistered “investment contract” – a rather cynical term, if you ask me – then you, my friend, are on your own. Consider it a lesson in humility. 💸

But fear not! Brokers and customers can conspire, I mean agree, to treat these rogue cryptos as mere “financial assets” under the arcane laws of commerce. A clever trick, perhaps, to ensure that should the broker tumble into bankruptcy, your precious assets remain yours – or at least, haven’t been already sold to any ‘creditors’. One can only hope.

A Fleeting Glimmer of Hope: “Pairs” Trading

Finally, a minor concession! The staff, in their infinite wisdom, have grudgingly admitted that swapping crypto securities for non-security cryptos – this “pairs trading” they call it – is not, in fact, a crime against the state. A small victory for freedom, perhaps, or merely a calculated move to appease the masses. 🤔 It’s difficult to tell. It all feels rather absurd, doesn’t it? Trading shadows for shadows. And we call this progress?

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2025-12-18 10:15