- The US SEC and the CFTC will henceforth join efforts in regulating cryptocurrencies and crypto trading platforms.
- Part of their plans is to have crypto exchanges registered and be considered legal operators.
America’s top regulators, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), have long been at odds over whose role it is to overlook cryptocurrencies, crypto platforms, and other crypto-related products and services. The former claimed most cryptocurrencies are securities and therefore, fall under its jurisdiction. Meanwhile, the latter claimed its core ethos is in line with the regulatory requirements of markets including those of crypto. The two watchdogs now plan on working collaboratively to supervise crypto and crypto platforms.
According to a recent announcement by SEC Chair Gary Gensler, despite their role differences, crypto will now be a common ground for the two regulators. Speaking for his agency, Gensler said it plans to increase oversight of the cryptocurrency market to protect investors from fraud. And together with the CFTC, the SEC will provide enhanced regulation of the crypto industry in the future.
SEC and CFTC to jointly regulate crypto and exchanges
Additionally, the SEC will require crypto exchanges in the US to be registered with it to operate legally. The Commission will also separate the custody of assets to minimize risks for investors. “These crypto platforms play roles similar to those of traditional regulated exchanges. Thus, investors should be protected in the same way,” Gensler said.
Coinbase and Binance are some of the leading digital asset exchanges that have been accused of violating US securities law. The former has specifically been called out by Gensler. This week, a US federal judge dismissed the charges against Binance on the grounds of late filing. The judge also said such laws do not apply to the exchange since it is headquartered in the Cayman Islands.
Per Gensler, equity and fixed income markets are mainly used by institutional investors. Exchanges, on the other hand, “have millions and sometimes tens of millions of retail customers directly buying and selling on the platform without going through a broker.” The SEC will therefore treat crypto trading platforms in a similar manner to retail exchanges.
Gensler also covered stablecoins and their alleged role in facilitating illicit activities, saying:
Crypto-to-crypto transactions allow users to skirt the traditional banking system, making it harder to track money laundering, taxes, and compliance.
As he concluded, the SEC boss said Washington’s regulators have held a long-time reputation for effective regulation of financial markets. He is therefore confident in their role in doing the same for the crypto industry.
We ought to apply these same protections in the crypto markets. Let’s not risk undermining 90 years of securities laws and creating some regulatory arbitrage or loopholes.
Following President Joe Biden’s executive crypto order, Gensler hopes to work with “colleagues across the government” to accomplish the regulators’ priorities: investor protection and safeguarding against criminal activities.
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