According to a public statement issued by the regulatory body on March 7, the US Securities and Exchange Commission (SEC) now requires that platforms trading digital assets which meet the determination of a security must register with the agency as an exchange.
Cryptocurrency exchanges would be controlled by the same regulations as traditional exchanges in the future. That is why they must register with the SEC “as a national securities exchange or be exempt from registration”.
In the announcement, the SEC warns that many online trading platforms referring to themselves as exchanges are now unregulated, though they can give the impression that they meet the regulatory standards.
“The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not,” said the SEC.
The announcement added that some of these illegal trading platforms install their own regulations and standards when picking digital assets that are not allowed or endorsed by the SEC.
The SEC added that facilities aiming to work as an alternative trading system (ATS) are also subject to regulatory demands. Exchanges of this kind should register with the SEC as a broker-dealer and become a participant of a self-regulatory organization (SRO).
“Registration as a broker-dealer subjects the ATS to a host of regulatory requirements, such as the requirement to have reasonable policies and procedures to prevent the misuse of material non-public information, books and records requirements, and financial responsibility rules, including, as applicable, requirements concerning the safeguarding and custody of customer funds and securities,” the SEC wrote.
In accordance with the statement, the SEC is taking these regulatory measures “to protect investors and avert against dishonest and manipulative trading practices.” The agency is also open to assisting trading platforms implementing new technologies to meet federal securities laws.
Last month, at a SEC and Commodities and Futures Trading Commission (CFTC) joint senate hearing, SEC’s head Jay Clayton promised smart and practical rules for
exchanges and investors dealing with Bitcoin and Ethereum, while Initial Coin Offerings (ICO) would be met with harder rules.