SEC explores segregating businesses at crypto exchanges

The US Securities and Exchange Commission is in search of methods to manage cryptocurrency buying and selling platforms that might embrace hiving off a few of their operations, says Gary Gensler, chair of the regulator.

In a speech on Monday, Gensler mentioned crypto buying and selling platforms that deal with greater than $100bn in transactions a day differ from conventional exchanges as a result of they do extra issues — corresponding to taking custody of buyer property and buying and selling in listed tokens as “market makers”.

Citing statistics that $14bn in buyer crypto property have been stolen final yr, he mentioned he had requested SEC workers to look into whether or not “it would appropriate to segregate out custody” features on the platforms.

He mentioned he had requested workers to think about related steps for the market-making actions of crypto exchanges due to points raised after they commerce as “principals against their customers on their platforms”.

Directing workers to discover these points might be a primary step by the fee in formally setting a rule.

Gensler reiterated his perception that the majority cryptocurrencies — and the platforms the place they’re traded — must be regulated by the SEC as a result of the tokens qualify as securities underneath US regulation.

“Today, many entrepreneurs are raising money from the public by selling crypto tokens, with the expectation that the managers will build an ecosystem where the token is useful,” Gensler mentioned.

“These aren’t laundromat tokens,” he added. “Somebody is building an ecosystem to make it useful, which will draw more users to the project. Thus, it’s important that we work to get crypto tokens that are securities to be registered with the SEC.”

Building on his earlier requires crypto platforms to register with the SEC, Gensler mentioned he had requested workers to work on “getting the platforms themselves registered and regulated much like exchanges”.

He added that as a result of a “few” cryptocurrencies are commodities underneath US regulation — functioning “like digital gold” — the SEC was additionally trying to work with the Commodity Futures Trading Commission, a derivatives regulator he as soon as headed, on “how we might jointly address such platforms”.

“There’s no reason to treat the crypto market differently just because different technology is used. We should be technology-neutral, but not policy-neutral,” he informed a convention on the University of Pennsylvania.

“These crypto platforms play roles similar to those of traditional regulated exchanges,” he added. “Investors should be protected in the same way. The US has the greatest capital markets because investors have faith in them.”

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