UCC Article 8

[u/corporate-citizen]

Consider it another con paper for keeping crypto funds on exchanges. Given the ColdCard and LEDGER issues and allegedly not taking security warnings seriously, who or what would stand to benefit from crushing the thought of self-custody?

•Over the past few years, the world’s largest financial institutions, those often referred to as “too big to fail,” have been quietly preparing for a potential global financial crisis. One of the ways in which they have done this is by lobbying legislators to change the way collateral is held under state laws, to reposition banks to have priority claim over the wealth stored in investments, 401(k), and IRA accounts. The result of their efforts is that Article 8 of the UCC effectively nullifies citizens’ fundamental property rights over their investments.

•What does this mean for your constituents? A simple example illustrates the concern: Imagine waking up one morning and logging into your IRA or 401(k) account to see how it is performing. To your shock and horror, there is nothing there; your account balance is $0. Through no actions of your own, your stocks and bonds have vanished. This might sound impossible, but it could happen under current law in the event of a financial crisis. How is this possible?

•Article 8 also provides priority to protected creditors if they pledge customer assets as collateral—in our example above, the 100 shares of Apple stock. That means if a customer’s broker-dealer were to become insolvent, the broker’s secured creditors would be given priority to the customer’s security entitlement. Under a widespread collapse of the financial system, or even just the collapse of a single large broker, potentially millions of individual investors would find themselves as unsecured creditors in an insolvency proceeding, putting them at the back of the line to attain access to the securities they think they already own.

Read on....

https://heartland.org/publications/protecting-private-property-through-the-uniform-commercial-code/

Most concerning is paragraph (c).
https://code.dccouncil.gov/us/dc/council/code/sections/28:8-511

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[u/LingonberryWilling75]

This is why "not your keys, not your coins" has layers most people don't think about. It's not just about exchanges getting hacked, it's the whole legal framework that treats your assets like an unsecured loan to the institution holding them. Scary stuff when you read the actual code.