In a surprise announcement, the US Securities and Exchange Commission (SEC) has now confirmed in a public statement that platforms trading digital assets which meet the definition of a security must register as an exchange.
The SEC has warned that cryptocurrency exchanges must register as “a national securities exchange or be exempt from registration” – elaborating that “the SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not”.
The SEC’s statement continues to outline that entities wishing to operate as an Alternative Trading System (ATS) will also be subject to regulatory requirements and must be registered with not only the SEC, but further must become a member of a self-regulatory organization.
The move would see cryptocurrency exchanges governed by the same rules that dictate the operation of traditional exchanges.
The statement comes as part of a self-determined move by the SEC to “protect investors and prevent against fraudulent and manipulative trading practices.”
The SEC outlined that:
“Registration as a broker-dealer subjects the ATS to a host of regulatory requirements, such as the requirement to have reasonable policies and procedures to prevent the misuse of material non-public information, books and records requirements, and financial responsibility rules, including, as applicable, requirements concerning the safeguarding and custody of customer funds and securities”.
The matter arrives as a means for investors to determine an online exchange of their choice; SEC registration would preclude that reputable online exchanges would either register as a National Securities Exchange or an Alternative Trading System, wherein tools offered by the US Financial Industry Regulatory Authority could provide further information about individuals or firms operating online platforms.
More broadly, the SEC has warned prospective investors to evaluate a potential trading platform’s online safeguards against cybersecurity threats.
The news has seen cryptocurrency markets react negatively, with Bitcoin leading a continuing sharp break beneath $10,000 USD levels at the time of writing.
The SEC’s recent announcement comes on the back of an explosive new report that reveals that the European Commission (as the executive arm of the European Union) is reportedly gearing up to reveal its plans for bloc-wide fintech regulation which will specifically address mechanisms in the wider blockchain ecosystem.
An alleged draft document outlines new blanket rules that would govern issues such as crowdfunding (through Initial Coin Offerings) as well as new blockchain technology standards.
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