US regulator urges registration of cryptocurrency exchanges

Other News Materials 7 March 2018 23:33 (UTC +04:00)

The US Securities and Exchange Commission said on Wednesday that many online trading platforms for cryptocurrencies should be registered with the regulator and subject to additional rules, in a further sign regulators are cracking down on the digital currency sector, according to Reuters.

In a statement, the SEC said these “potentially unlawful” platforms may be giving investors an unearned sense of safety by labelling themselves as ‘exchanges’. The regulator said many of these platforms likely need to register with the SEC as a regulated national securities exchange or an alternate trading system (ATS).

The new statement marks the latest effort by the SEC to apply existing federal securities laws to the rapidly growing cryptocurrency sector. SEC Chief Jay Clayton has repeatedly expressed concern about cryptocurrencies and “initial coin offerings,” or ICOs, and has urged investors to exercise caution.

“The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not,” the agency said in the statement.

Clayton has said in the past that he generally considers ICOs to be securities offerings subject to certain regulatory requirements.

On Wednesday, the SEC went further by suggesting the majority of secondary market trading in those digital tokens was also subject to its jurisdiction.

The regulator said any platform providing trading of digital assets that behave like securities and which operate like exchanges must register with the SEC as a national securities exchange, or seek an exemption such as ATS registration.

While there are dozens of platforms offering trading in cryptocurrencies, Reuters could only identify one, Liquidity M – which is the broker dealer for Templum – that had registered with the SEC as an ATS, according to SEC data.

The regulator added that some cryptocurrency platforms may not behave like exchanges but offer related services - such as digital wallets - that trigger other registration requirements, such as becoming a clearing agent or broker dealer.

The SEC statement follows media reports on Tuesday that the US Treasury’s financial crime division told Congress in a letter last month that some ICOs may also be subject to the Treasury’s money transmission registration, antimoney laundering and Bank Secrecy Act requirements.