US SEC: Securities Law Cover Cryptocurrencies

Mar 08, 2018 at 23:02

The US Securities and Exchange Commission (SEC) is cracking down on cryptocurrency exchanges after it issued a statement cautioning investors about “potentially unlawful online platforms for trading digital assets.”

The US state regulator said has stressed that online trading platforms have become a popular way investors can buy and sell digital assets, including coins and tokens offered initial coin offerings (ICOs).

However, it noted that some cryptocurrency exchanges provide a mechanism for trading assets that meet the definition of a “security” under the federal securities laws.

Federal securities law aims to protect investors and prevent against fraudulent and manipulative trading practices.

“If a platform offers trading of digital assets that are securities and operates as an ‘exchange,’ as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration,” the SEC said.

In issuing the statement, the SEC urged investors to transact with any registered platform or entity such as a national securities exchange, alternative trading system (“ATS”), or broker-dealer.

“investors should not assume the trading protocols meet the standards of an SEC-registered national securities exchange,” it said.

The state regulator also encouraged market participants developing trading platforms to consult with legal counsel and SEC staff to apply federal securities laws.

“In advancing the SEC’s mission to protect investors, the SEC staff will continue to focus on platforms that offer trading of digital assets and their compliance with the federal securities laws,” it said.