U.S. regulators considering new rules for cryptocurrency
Experts predict more enforcement actions in the crypto industry as U.S. regulators contemplate adopting new rules. Both the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have been active this year, bringing charges against major exchanges like Binance, Kraken, and Coinbase. The SEC is currently evaluating two proposed rules that could be implemented in the coming year, while the CFTC recently voted to propose a rule to enhance customer protections following the collapse of FTX exchange.
The SEC’s focus
SEC Chair Gary Gensler consistently views most cryptocurrencies as securities and urges crypto exchanges to register with the agency. Experts anticipate that the SEC will continue with its enforcement actions rather than introducing new regulations. The agency may finalize two proposed rules concerning custodians and decentralized exchanges.
The SEC’s custody rule
In February, the SEC proposed a rule requiring registered investment advisers to store cryptocurrencies with qualified custodians. This update to the custody rule aims to include digital assets within its scope and prevent investment advisers from relying on crypto platforms as qualified custodians. However, there is a concern that this rule could limit options for custodians with expertise in digital assets and lead to concentration among a few registered custodians.
The SEC’s ATS rule
The SEC also proposed a rule to expand the definition of an exchange, potentially encompassing decentralized exchanges (DeFi). If adopted, decentralized projects would need to register with the SEC as alternative trading systems (ATS), subjecting them to mandatory disclosures and operational restrictions. Industry experts believe this rule could significantly impact decentralized exchanges and force them to become centralized in order to comply.
CFTC’s latest rule proposal
After the collapse of FTX exchange, the CFTC voted to propose a rule that enhances customer protections for trades conducted through derivatives clearing organizations (DCOs). This rule, called the “Protection of clearing member funds held by derivatives clearing organizations,” requires DCOs to segregate customer funds from their own house funds. Moving forward, the CFTC may focus on regulating spot markets.
Hot Take: Regulators to Intensify Crypto Enforcement
As U.S. regulators consider new rules for the cryptocurrency industry, experts predict an increase in enforcement actions. The SEC’s proposed rules on custodians and decentralized exchanges could have a significant impact on the industry. Additionally, the CFTC’s focus on customer protections and potential regulation of spot markets indicates a tightening regulatory environment. It is crucial for market participants to stay informed about these developments and ensure compliance with existing and future regulations.
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