BIG NEWS FROM SEC🚨-clarity in US #crypto regulation did come w/ #Wyoming's Oct 23 #NoActionLetter regarding #qualifiedcustodian (SEC just confirmed)

tl;dr=SEC Custody Rule favors banks as QCs, bc state trust cos may not give as much protection as banks

sec.gov/news/public-st…
2/ Lack of clarity has kept the HUGE #RIA & asset mgr market out of #crypto but this should help. Sum:

* banks are #qualifiedcustodian by def'n, but
* state-chartered trust cos may not be

RIA must defend that a state trust co provides as much protection as a bank, broker, FCM.
3/ Consider how SEC frames the ?s:
* do state trust cos have "characteristics similar to" institutions "SEC has identified as QCs" (ie, state trust cos aren't in group SEC identifies as QCs)
* wld state trust co as QC add gaps/enhancements? (again the ? presumes they're not QCs)
4/ This is such a timely announcement from the SEC,coming right in the middle of big #RIA conf by @CoinDesk called "#Bitcoin for Advisors" today. I can only imagine the buzz about this among the audience, @TR401.
5/ Reminder:
i. banks are #qualifiedcustodian by def'n,
ii. banks can access Fed liquidity,
iii. banks are MUCH better capitalized, audited & subject to more frequent supervisory exams, &
iv. banks offer customers clearer asset segregation protection in bankruptcy than trust cos
6/ Above reasons are why the big securities custodians are banks, not trust cos. #Crypto custody market was already moving toward banks when OCC letter authorizing ntl banks to custody crypto came out in July + 2 #Wyoming #SPDI banks got charters--this prob accelerates that trend

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More from @CaitlinLong_

28 Oct
1/ HEY CRYPTO LAWYERS: buckle in bc a big piece of US #crypto regulatory puzzle fell in place yesterday. Culminates >2yr process, coordinating w/ SEC & other regulators, to clarify "#qualifiedcustodian." #NoActionLetter by #Wyoming Banking Division🤠here:
docs.google.com/viewer?a=v&pid…
2/ Here's an article from @ForbesCrypto's @AndreaTinianow & a post from McDermott Will & Emery, the attorneys who obtained the letter for @TwoOceanTrust of #Wyoming.

So...WHAT DOES IT REALLY MEAN??? 🤔

mwe.com/media/mcdermot…

forbes.com/sites/andreati…
3/ Follow along! Under SEC Custody Rule & SEC Customer Protection Rule, #RIAs (Registered Investment Advisers) & investment managers must hire a #qualifiedcustodian to store customers' assets.

But traditional custody banks can't/won't touch #bitcoin & other #crypto right now.
Read 22 tweets
2 Oct
1/ FASCINATING MOVE by SEC on whether a trust company qualifies as a bank under its rules. This enforcement action doesn't pertain to #crypto specifically but it applies broadly to the key question--does a trust co qualify as a bank under SEC custody rule?
sec.gov/enforce/33-108…
2/ Answer was a resounding "NO" in this case--the trust co didn't qualify for exemptions that apply to banks bc trust co didn't exercise "substantial investment authority." This is a KEY POINT--a trust co that doesn't act as a fiduciary is NOT A BANK under SEC's rules.
3/ This is one of the big reasons why #Wyoming created #SPDI bank charter--bc trust cos are prob not qualified custodians under SEC rules. To be a bank under SEC rules custodian must either (1) take deposits or (2) act as fiduciary. Trust cos can't take deposits (only banks can).
Read 8 tweets
26 Sep
WHOA! What a speech by @CynthiaLummis (almost certainly about to become a US Senator) re why #bitcoin is a store of value, which may rise to be an alternative to the US dollar."I bought my first #bitcoin in 2013 bc I believe in the economic power of scarcity...now I'm a HODLer"🤠
HOLY COW--this is a stunning speech!
She just attacked the Bank Secrecy Act!
Read 7 tweets
16 Sep
1/ IT'S OFFICIAL!!! Welcome to #Wyoming, @krakenfx!

🐙+🤠=🔥🚀🎉

What a win-win for #crypto & Wyoming! As of **NOW** Kraken has a US bank charter—a 100% reserves-required, audit required (w/ #ProofOfReserves), custody via legal bailment, no #rehypothecation type of bank!🤠
2/ The vote of #Wyoming's Banking Board just concluded & it was UNANIMOUS! It took 27 months for the first #Wyoming SPDI to obtain a charter—congrats to the dozens of people who made it happen, esp @GovGordon, @TylerLindholm & Wyoming legislators & the Wyoming Division of Banking
3/ I’ll be back w/ more analysis later. Next applicant in line for #Wyoming SPDI is @AvantiBT later this Fall (more are on the way). But today is @krakenfx's day. As a shareholder, I'm so happy for @jespow & Kraken team! Applications for this charter opened a yr ago--took longer
Read 5 tweets
23 Aug
1/ JUST READ opinion in latest lawsuit against #crypto exchanges/custodians over whether customers are owed forks/airdrops. As discussed on podcasts (@APompliano, @PeterMcCormack, @stephanlivera, @PrestonPysh+others), these contracts tend to be 1-sided...
law.justia.com/cases/californ…
2/ ...& judges generally will uphold the contract to which parties agreed, so breach of contract & conversion claims not likely to win (& they aren't). This is why these 1-sided contracts are a prob for institutional investors who owe a #fiduciary obligation to their customers...
3/ ...a fiduciary asset manager who agrees to a vague, 1-sided contract will get sued by its clients for breach of fiduciary duty if something goes wrong (& if it's an #ERISA fund, that fiduciary has PERSONAL liability & will be sued personally, not just sued professionally)...
Read 9 tweets
6 Aug
1/ MORE ANALYSIS-Goldman's new head of #digitalassets is a #repo trader based in LONDON. This is significant bc UK law basically has no limits on #rehypothecation. To be clear I'm not worried abt #bitcoin--as a system it's immune to WallSt's leverage games
2/ That doesn't mean its price won't be impacted tho--bc #rehypothecation fulfills real demand w/ artificially created supply & thereby suppresses price, all else equal. Rehypothecation works as long as there's a lender of last resort. But #bitcoin has no lender of last resort!🚧
3/ So, how many times could a #bitcoin be rehypothecated? In UK there's basically no limit bc the broker/dealer takes outright title to the customer's asset. This is why Lehman transferred so many of its assets to its UK subsidiary from its US subsidiary. kramerlevin.com/en/perspective…
Read 6 tweets

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