Friday, 20 April, 2018

U.S. regulator urges registration of cryptocurrency exchanges

Bitcoins are displayed next to a Bitcoin ATM. Kin Cheung  AP Bitcoins are displayed next to a Bitcoin ATM. Kin Cheung AP
Nellie Chapman | 08 March, 2018, 11:54

According to the statement, the SEC is undertaking these regulatory measures "to protect investors and prevent against fraudulent and manipulative trading practices." .

In the statement, the SEC warns that many online trading platforms referring to themselves as exchanges are now unregulated, though they can give the impression that they are compliant with the regulatory standards. This defined by a 1946 supreme court ruling that says a security involves the investment of money in a common enterprise, in which the investor profits primarily from others' efforts.

The SEC is anxious investors in bitcoin and other cryptocurrencies think they're getting the protections and benefits of a registered exchange, when they're not.

The SEC said that it did not review the trading protocols applied by crypto platforms, suggesting that some services might provide different standards based on the investors' profiles despite claiming a single approach. But the SEC's new encouragement for trading platforms to register reveals interest of the United States government to take benefits from this profitable crypto world. According to the SEC, all digital currencies should be listed as securities and registered with regulators.

In its statement today, the SEC noted that by calling themselves "exchanges", many of these platforms might "give the impression" that they are regulated marketplaces, subject to the standards of a national securities exchange and the oversight of the commission.

A national securities exchange must itself comply with the federal securities laws and must file its rules with the Commission.

Does the platform operate as an alternative trading system (ATS)?

"Under the current SEC guidance, Coinbase and the GDAX exchange are exempt from registration requirements as they do not list assets that could be considered securities".

In a statement, the SEC said these "potentially unlawful" platforms may be giving investors an unearned sense of safety by labelling themselves as "exchanges". These services would include digital wallets that receive, hold, and transfer digital currency. The trading of ICO tokens that are unregistered securities on unlicensed exchanges has gone on for far too long. All of the national securities exchanges, like the New York Stock Exchange, Chicago Stock Exchange, or Cboe Exchange, are registered with the SEC.

"Online trading platforms have become a popular way investors can buy and sell digital assets... a number of these platforms provide a mechanism for trading assets that meet the definition of a "security" under the federal securities laws".

The SEC encouraged market participants to consult with both legal counsel as well as to reach out with SEC staff.