SEC Begins to Scale Back the Crypto Assets and Cyber Unit

S.E.C. Moves to Scale Back Its Crypto Enforcement Efforts

The Securities and Exchange Commission is moving to scale back a special unit of more than 50 lawyers and staff members that had been dedicated to bringing crypto enforcement actions, five people with knowledge of the matter said.[…]

Some of the lawyers in the crypto unit are being assigned to other departments in the S.E.C., the people said. One of the unit’s top lawyers was moved out of the enforcement division. Some of the people briefed on the shake-up described that move as an unfair demotion.

The Journey Begins

The crypto road trip on which the newly announced Crypto Task Force has embarked likewise should be more enjoyable and less risky than the crypto road trip the Commission has taken the industry on for the last decade. On that last trip, the Commission refused to use regulatory tools at its disposal and incessantly slammed on the enforcement brakes as it lurched along a meandering route with a destination not discernible to anyone. But just as modern technology does not eliminate the risks of taking to the open road, this new journey toward regulatory clarity still presents dangers, and both the Commission and the public need to stay alert and aware of the risks and opportunities that may lie ahead.[…]

Second, it took us a long time to get into this mess, and it is going to take us some time to get out of it…. there have been many enforcement actions, a number of no-action letters, some exemptive relief, endless talk about crypto in speeches and statements, lots of meetings with crypto entrepreneurs many inter-agency and international crypto working groups, discussion of certain aspects of crypto in rulemaking proposals, consideration of crypto-related issues in reviews of registration statements and other filings, and approval of numerous SRO proposed rule changes to list crypto exchange-traded products. Throughout this time, the Commission’s handling of crypto has been marked by legal imprecision and commercial impracticality. Consequently, many cases remain in litigation, many rules remain in the proposal stage, and many market participants remain in limbo. Determining how best to disentangle all these strands, including ongoing litigation, will take time. It will involve work across the whole agency and cooperation with other regulators. Please be patient. The Task Force wants to get to a good place, but we need to do so in an orderly, practical, and legally defensible way.

Memecoin Suits Test Trump’s SEC on Pivot in Crypto Enforcement

Securities lawsuits targeting memecoins are querying how digital asset losses should be litigated as President Donald Trump‘s administration signals a softer approach to crypto.

A string of securities lawsuits filed over the past couple of months turn on whether memecoin trades should be treated as security transactions. Speculative and volatile—even when compared to other digital assets—memecoins are crypto tokens that gain traction through internet popularity and collect buyers by tapping into their fear of missing out.

SWF?

But if you were an aide to Donald Trump in charge of the sovereign wealth fund, could you trade for the fund using inside information about what Trump was up to? Every time he wants to do something financially chaotic, he tells you 10 minutes in advance, and you put on some trades? Not a traditional sovereign wealth fund — not long-term investments in strategically important businesses, not diversified investments in stocks and bonds — but more of a day-trading, insider-trading, market-timing, volatility-harvesting operation. Also so much crypto.

It just seems like a bad enough idea that it might happen. Here are two important objections:

1. The people on the other side of these trades would be, you know, regular US investors, who might feel aggrieved about losing out to government insider trading. On the Money Stuff podcast earlier this year, we discussed a reader question about why the government doesn’t regularly insider trade on, e.g., economic data, and my main answer was this one: The government is not primarily in the business of making money, but of serving its citizens, and insider trading against the citizens seems like bad service. But I am not sure the administration would care that much. Arguably this is mostly a transfer of wealth from BlackRock to the Treasury, and BlackRock is politically disfavored.

The MicroStrategy copycats: companies turn to bitcoin to boost share price

A subsidiary of top global consulting firm McKinsey & Company agreed to pay Software business-turned-bitcoin hoarder MicroStrategy is inspiring a host of companies to buy the cryptocurrency and hold it in their corporate treasuries, in a manoeuvre aimed at boosting their flagging share prices.

Pharmaceutical companies and advertisers are among 78 listed companies around the world that are following the US group’s example in buying the coins to hold in place of cash, according to data from crypto security company Coinkite.[…]

“Bitcoin is like kryptonite for the short sellers,” said Brian Estes, chief investment officer at Off The Chain Capital, an investment manager which participated in the placement. “[You can] scare out the shorts with bitcoin.”