As a reminder, the US financial regulator is trying to manage the cryptocurrency industry through a securities regulatory framework that dates back to the 1930s. Naturally, such attempts can hardly be called effective. After all, not only cryptocurrencies did not exist then, but even the internet, along with smartphones.

This approach is forcing large cryptocurrency companies to leave the US. In particular, at the end of the week it was revealed that cryptocurrency exchange Gemini, from the famous Winklevoss brothers, would launch a separate trading platform outside of the US with support for crypto derivatives. They can't do the same in their home market because legislation prevents them from doing so.

The Winklevoss brothers, founders of the crypto exchange Gemini

That said, even former employees of the Commission are not happy with such a policy. In particular, former SEC Chairman Jay Clayton made such remarks on CNBC.

The courts are not an effective place to decide securities classification issues. Europe is trying to figure out how to introduce cryptocurrency into the financial system, while US policy is aimed at keeping digital assets out of it.

However, what is happening is not stopping the SEC. The regulator continues to bend its line and make itself look far from favourable.

Which investments analysts recommend

SEC officials believe that some products have additional complexities or risk characteristics – simply put, cryptocurrencies are “far more dangerous” than they first appear. Here’s a quote from a bulletin published by the Commission, cited by Decrypt.

Examples of investments that may require heightened scrutiny include inverse or leveraged exchange-traded products, margin investments, derivatives, crypto-assets, obscure stocks, private placements, asset-backed securities, volatility-linked exchange-traded products and reverse-conversion bonds, among others.

And this is a rather amusing warning given that even Bitcoin ended the first quarter of 2023 with a 69 per cent rise. Accordingly, in this case, the US regulator's conservative approach does protect investors - but only from profits. In general, the SEC continues to be guided by outdated legislation for digital assets and actively discourages ordinary people from associating with coins. In other words, officials are trying to decide for people what to do with their money.

Given this week’s fall in BTC, some investors may indeed need an advisor’s help

In practice this means that in addition to actually understanding the investment products they offer, the SEC also wants firms and financial professionals to study their clients. In theory, this is to understand whether the chosen investment is really suitable for them.

That is, the regulator wants to know whether the retail investor has a specific trading objective that fits the description of the asset and whether he or she is able to tolerate the increased risk of financial losses. However, having such a purpose or ability does not automatically mean that the product is in the best interest of the investor, which also raises certain questions about the Commission’s activity.

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Although in some cases, such recommendations make sense – at least they should have been heeded by the management of a Canadian pension fund called the Ontario Teachers’ Pension Plan. According to Cointelegraph’s sources, the fund lost all $95 million invested in cryptocurrency exchange FTX in 2022.

As a reminder, it filed for formal bankruptcy in November. The fund itself invested in FTX twice - at the peak of the bull run in 2021 and in early 2022. It now has $190 billion in assets under management, which also gives an idea of the scale of the exchange's popularity in its day.

Fund CEO Joe Taylor said in an interview that it would be unwise for his fund to rush into another crypto investment. They are still sorting out what happened with FTX and will be much more cautious before investing in new crypto-related projects. The pension fund is responsible for providing pensions for more than 330,000 teachers and school employees.

The head of the Canadian pension fund Joe Taylor

The fund’s management now intends to direct its investments into traditional markets like real estate and seeks access to the private lending sector. Overall, the fund plans to invest about $7.4 billion over the next three years to build its portfolio in the above-mentioned areas.


We believe that the Securities and Exchange Commission is backing itself into a corner with such an approach. The regulator is increasingly losing its own reputation as its actions force companies out of the local market. In addition, trying to manage innovation with outdated laws is not a good idea either.
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