The Securities and Exchange Commission (SEC) has issued a report regarding the cryptocurrency exchanges. In the report, the regulator has announced that all cryptocurrency exchanges from the USA will have to register to for approval.
The report was distributed by the SEC even on social media platforms like Twitter with the explanation that the new act is designed to protect the investors and to limit the number of fraudulent business practices. While many of the US-based crypto exchanges have declared that they have registered all the documents, the SEC will also start to investigate the accuracy of the already submitted papers.
To find out which exchanges are certified correctly, the regulator has given a list of the registered businesses and another list of the alternative trading systems (exchanges) endorsed by the same regulator. The list compiles a lot of big names in the stock exchange industry like CBOE, Nasdaq, NYSE.
The Alternative Trading Systems
“[…]a trading system that meets the definition of “exchange” under federal securities laws but is not required to register as a national securities exchange if the ATS operates under the exemption provided under Exchange Act Rule 3a1-1(a),” the definition of the Alternative Trading Systems (ATSs) provided by the SEC
In other words, the ATSs mentioned in the list, will not require registering, but they will be liable to an investigation after which they will receive validation certificate. In this category are huge names like JPMorgan & Chase, Nasdaq, Deutsche Bank, Credit Suisse.
According to the report, the businesses that are related to the distribution of cryptocurrencies but do not qualify as an exchange will have to go through a different registration process. Besides companies, the brokers, transfer agents, and cleary registry agencies are also included in the special section of registration.
The platforms that are offering cryptocurrencies labeled as securities will also have to register for selling it.
The SEC Urges for Due Diligence
The statements are not targeting the crypto exchanges directly but instead, they are aiming to investors. The regulator is doing its due diligence by alerting the users of potential interactions with businesses and individuals that are not fully regulated. In other words, the report is not saying that the companies have to be regulated in order to continue their activity.
Besides the warnings, the US regulator has posted a series of questions that an investor should ask an organization before deciding to invest in the cryptocurrency. Here are a few examples.
- How does the platform protect users’ commerce and personal identification information?
- What are the protections of the platform against cybersecurity threats, such as hacking or intrusions?
- And does the platform keep the assets of the users and how are these assets safeguarded?
The cryptocurrency market started to lose ground once again because of the latest reports from the SEC and we have to clarify a few things.
The new statements are reinforcing the idea that if crypto investors wish to be protected, they have to use only registered exchange houses.
While the reports are targetting mostly crypto businesses, the SEC did not forget to emphasize that the less instructed users among with, the more accustomed ones still need protection; from possible scams or the projects that are lacking the right expertise in the cryptocurrency market.
One of the most used exchange platforms in the USA Bittrex has already responded to the new regulations:
Bittrex uses a robust digital token review process to ensure the tokens listed on the exchange are compliant with U.S. law and are not considered securities. Bittrex is committed to helping advance the United States’ global leadership in this emerging industry, and we look forward to continuing our proactive dialogue with the SEC and other regulators on how to build a secure, fully-regulated environment for blockchain that encourages innovation and economic growth.”
Last month, the head of the SEC, Jay Clayton and the head of Commodities Futures Trading Commission (CFTC) Cristopher Giancarlo, attempted a hearing at the Senate Committee on Banking, Housing, and Urban Affairs.