It got lost in the FinCen FUD - the SEC proposed new guidelines pertaining to the sale of "digital asset securities." Prospective legislation would impact the future of crypto in the United States. You still have two weeks to make your voice heard.

In December, in the midst of debate over the implications of the SEC's XRP suit, and furor regarding proposed FinCen legislation, the SEC quietly unveiled 17 CFR Part 240 - "Custody of Digital Asset Securities by Special Purpose Broker-Dealers."

the full "Commission Statement and Request for Comment" may be read here

In short, the SEC is proposing that non-registered broker-dealers will be allowed to deal in "digital asset securities" for at least a period of five years. That sounds all well and good, BUT...

• Broker-Dealers offering digital asset securities would be required to limit their business to "dealing in, effecting transactions in, maintaining custody of, and/or operating an alternative trading system for digital asset securities."

Interpreted literally, this not only means that traditional brokerage houses would not be allowed to sell tokenized stocks, but they would likely be discouraged from offering any cryptocurrencies to their user bases. Likewise, cryptocurrency exchanges would not be allowed to sell "digital asset securities" alongside "digital asset non-securities" (like Bitcoin).

• It is required that the broker-dealer "establishes, maintains, and enforces reasonably designed written policies and procedures to conduct and document an analysis of whether a particular digital asset is a security offered and sold pursuant to an effective registration statement or an available exemption from registration, and whether the broker-dealer meets its requirements to comply with the federal securities laws with respect to effecting transactions in the digital asset security, before undertaking to effect transactions in and maintain custody of the digital asset security."

Hundreds of thousands of dollars of litigation does not always lead to a clear answer as to what is and is not a security. This requirement seems impractical at best and intimidating at worst, and it would presumably be seen as applying to all cryptocurrency exchanges that served US customers.

• The commission statement additionally emphasizes existing security law which requires that broker-dealers maintain control and custody of behalf of their customers, and appears to infer an assertion that it remains illegal for broker-dealers to allow for the withdrawal of digital asset securities (except in the event of bankruptcy, or death, or what not).

In other words, in the name of keeping investors safe, the SEC says that cryptocurrencies should be exclusively held by one of few centralized brokerage houses.

This proposal is pre-Biden admin and hopefully does not reflect the views of Gary Gensler. Nevertheless, this remains a good opportunity to make your voice heard. Feedback can be submitted here.

Since December, only twenty comments have been submitted to the SEC, and the few I have read are nothing more than XRP holders bitching about the SEC's decision to sue Ripple.