Crypto Chaos: SEC Finally Speaks 🙄

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Ah, another pronouncement from the American authorities. As if the world wasn’t complicated enough, the esteemed Securities and Exchange Commission-those tireless guardians of our financial well-being-have seen fit to issue “detailed guidelines” regarding the custody of these
 crypto assets. One wonders if they haven’t more pressing concerns, like the price of tea in Boston. ☕

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The SEC and the Blockchain: A Most Peculiar Relationship

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On Wednesday, a staff from the Division of Trading and Markets, bless their hearts, released a statement. It concerns itself with a rather arcane rule – paragraph (b)(1) of Rule 15c3-3, involving “physical possession” of securities. Apparently, this applies even to those ephemeral things called tokenized securities. 📜 One can only imagine the late-night deliberations this required.

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This Rule 15c3-3, dating back to the glorious days of 1934, demands brokers “promptly obtain and thereafter maintain physical possession” of customer securities. Naturally, this presents a slight problem when those securities exist as lines of code on
 a blockchain. đŸ€” It’s like trying to nail jelly to a wall, really.

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The guidelines, in their infinite wisdom, now state that a broker can claim “physical possession” if they can merely access the crypto asset and ‘transfer it’ on this ‘distributed ledger technology’ (DLT). One assumes they’ve employed a very clever accountant to make that logic hold water.

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And of course, there’s the need for an ‘thorough assessment’ of the DLT. Regular assessments, mind you! As if the network itself might suddenly sprout legs and wander off. đŸš¶\u200d♀

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Furthermore, brokers must have “reasonably designed written policies and procedures” for security, protect their private keys (as if they were state secrets!), and prepare for potential disasters: theft, unauthorized usage, network attacks, even
 hard forks. Goodness gracious. It\’s all so very
 modern.

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The key, it seems, is to ensure no one-not even the customer, or a harmless affiliate-has access to those all-important private keys without permission. A veritable Fort Knox, this crypto custody business. 💰

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However – and this is a rather important ‘however’ – if the broker-dealer is aware of any ‘material security or operational problems’ with the DLT
 well, then they don’t actually ‘possess’ the asset. A curious loophole, wouldn\’t you say? 🧐

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A Path to Clarity? Or Just More Fog?

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The SEC assures us this is all part of a larger effort to provide “clarity” on crypto assets. One wonders if clarity isn’t simply too much to ask. They\’ve published guidance for retail investors (as if they’ll understand it), and are now contemplating modernizing their rules. A veritable flurry of activity! 👏

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They\’re even considering “tokenization” to modernize the issuance of equities. According to one Mr. Paul Atkins, this technology possesses “the potential to transform our capital markets.” A bold claim! Although, one suspects the transformation will involve considerably more paperwork. 📑

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And the piĂšce de rĂ©sistance: potential “innovation exemption rules” by 2026. A whole two years from now! Firms will be able to launch products without complying with all those “burdensome” regulations. A stroke of genius, indeed. Apparently, core policy aims can now be achieved through “principles-based conditions.” It’s a brave new world. 🌎

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Crypto Chaos: SEC Finally Speaks 🙄Crypto Chaos: SEC Finally Speaks 🙄

Ah, another pronouncement from the American authorities. As if the world wasn’t complicated enough, the esteemed Securities and Exchange Commission-those tireless guardians of our financial well-being-have seen fit to issue “detailed guidelines” regarding the custody of these
 crypto assets. One wonders if they haven’t more pressing concerns, like the price of tea in Boston. ☕

The SEC and the Blockchain: A Most Peculiar Relationship

On Wednesday, a staff from the Division of Trading and Markets, bless their hearts, released a statement. It concerns itself with a rather arcane rule – paragraph (b)(1) of Rule 15c3-3, involving “physical possession” of securities. Apparently, this applies even to those ephemeral things called tokenized securities. 📜 One can only imagine the late-night deliberations this required.

This Rule 15c3-3, dating back to the glorious days of 1934, demands brokers “promptly obtain and thereafter maintain physical possession” of customer securities. Naturally, this presents a slight problem when those securities exist as lines of code on
 a blockchain. đŸ€” It’s like trying to nail jelly to a wall, really.

The guidelines, in their infinite wisdom, now state that a broker can claim “physical possession” if they can merely access the crypto asset and ‘transfer it’ on this ‘distributed ledger technology’ (DLT). One assumes they’ve employed a very clever accountant to make that logic hold water.

And of course, there’s the need for an ‘thorough assessment’ of the DLT. Regular assessments, mind you! As if the network itself might suddenly sprout legs and wander off. đŸš¶â€â™€ïž

Furthermore, brokers must have “reasonably designed written policies and procedures” for security, protect their private keys (as if they were state secrets!), and prepare for potential disasters: theft, unauthorized usage, network attacks, even
 hard forks. Goodness gracious. It’s all so very
 modern.

The key, it seems, is to ensure no one-not even the customer, or a harmless affiliate-has access to those all-important private keys without permission. A veritable Fort Knox, this crypto custody business. 💰

However – and this is a rather important ‘however’ – if the broker-dealer is aware of any ‘material security or operational problems’ with the DLT
 well, then they don’t actually ‘possess’ the asset. A curious loophole, wouldn’t you say? 🧐

A Path to Clarity? Or Just More Fog?

The SEC assures us this is all part of a larger effort to provide “clarity” on crypto assets. One wonders if clarity isn’t simply too much to ask. They’ve published guidance for retail investors (as if they’ll understand it), and are now contemplating modernizing their rules. A veritable flurry of activity! 👏

They’re even considering “tokenization” to modernize the issuance of equities. According to one Mr. Paul Atkins, this technology possesses “the potential to transform our capital markets.” A bold claim! Although, one suspects the transformation will involve considerably more paperwork. 📑

And the piĂšce de rĂ©sistance: potential “innovation exemption rules” by 2026. A whole two years from now! Firms will be able to launch products without complying with all those “burdensome” regulations. A stroke of genius, indeed. Apparently, core policy aims can now be achieved through “principles-based conditions.” It’s a brave new world. 🌎

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2025-12-19 10:21