The United States Securities and Exchange Commission (SEC) decided to update the Securities Act in force since 1934, through which it extends regulation to new market participants. Among them is the cryptocurrency sector.
As the SEC points out in a statement on February 6, as part of the update, the agency approved new rules that require companies that act as intermediaries to register with the Commission.
"Absent an exemption or exception, if someone trades in a manner consistent with de facto market making, they must register with us as a trader," said SEC Chairman Gary Gensler.
To this end, the concept of "brokers" or "government securities brokers " is expanded . In this way, the rules will apply to market participants "that assume significant roles in the provision of liquidity," the letter states.
Specifically, under the new definitions, a broker is one who manifests "commercial interest in the best prices available on both sides of the market for the same security."
It is also one that can generate income "mainly by capturing the spreads between the buy and sell offers, or by capturing any incentives offered to the commercial interest of providing liquidity, in the trading venues."
They add that "the intermediary framework will depend on a functional analysis based on the security trading activities carried out by a person, not on the type of security being traded."
A lower limit was also established for the application of the new standards. Brokers must hold or control more than $50 million to be subject to the new rules.
Added a provision prohibiting evasion of registration through participation in activities that indirectly qualify as merchants or unbundled accounts. The rules will take effect 60 days after their publication in the Federal Register. The SEC decided not to exclude any particular type of security from applying the new rules.
For this reason, the rule was extended to cryptoassets that are classified as such by the agency. This, amid questions about whether or not cryptocurrencies are securities, which are still being debated in US courts through lawsuits against exchanges.
It is explained that, at first, the exclusion of cryptocurrencies from the update was considered, but then it was thought that this decision would have "negative competitive effects" by giving companies in the ecosystem an advantage over those that have to register.
Thus, cryptocurrencies were included in the draft project approved in 2022, without further discussion or analysis. The goal, according to Gensler, is “to promote market integrity, resilience and transparency.”
The rules were approved on a party-line vote, with Republican commissioners Hester M. Peirce and Mark T. Uyeda voting against . There are also objections from members of the cryptocurrency sector and politicians who are in favor of the industry, who aspire to specific regulation rejecting the SEC's plan to apply current laws.
The questions have to do with the fact that the regulations will include software protocols in the area of DeFi, which will have to register as brokers.
A situation that for Mark Uyeda is not viable, due to a lack of transparent compliance guidelines. Additionally, many DeFi activities may find it impossible to register or remain in compliance with SEC demands.
"Today's action codifies the Commission's view that the definition of 'corridor' is virtually unlimited. The public should be concerned about the immense breadth of this jurisdiction,” Uyeda commented.
Commissioner Caroline Crenshaw, for her part, supported the changes, saying that "many market participants with a significant portion of the volume are engaging in activities similar to those carried out by brokers, without being registered."
