SEC Allows Broker-Dealers to Handle Crypto Securities for 5 Years
- The SEC will allow crypto-focused broker-dealers that abide by certain rules to operate for five years.
- Custodians will need to verify they hold and control their customers’ digital assets.
United States Securities and Exchange Commission building. The Tokenist
The U.S. Securities and Exchange Commission will allow crypto-focused broker-dealers to operate for five years without the fear of enforcement, if they can verify they hold and control customers’ digital asset securities.
According to an announcement published on 23 December, broker-dealers will need to limit their business to digital asset securities only, establish and implement policies to mitigate risk and provide customers with disclosures regarding the risk in engaging in cryptocurrencies.
Last year, the SEC and the Financial Industry Regulatory Authority — agency tasked with approving broker-dealer applications — raised questions about digital asset custodians’ ability to comply with customer protection rules in the U.S.
The two government agencies debated whether companies that hold their customers’ crypto assets complied with the Customer Protection Rule, a part of the Securities Exchange Act of 1934 that requires broker-dealers to obtain and maintain physical possession or control of all fully-paid and excess margin securities of its customers.
The SEC said the five-year period would allow it to understand how to regulate the crypto space. The Commission also provided the public with a 60-day period to comment on specific questions regarding the industry. These include the best practices to protect against theft, holding private keys, and resolving 51% attacks.
- The U.S. SEC, CFTC, and FTC have all filed separate lawsuits against bankrupt crypto lender Celsius and its former CEO Alex Mashinsky, charging them with multiple counts of fraud.
- Mashinsky was also arrested in New York on Thursday, and later charged by the Department of Justice with securities fraud, commodities fraud, and wire fraud.
Former Celsius CEO Alex Mashinsky on Centre Stage during day three of Web Summit, Lisbon, Portugal, 4 November 2021.Piaras Ó Mídheach/Web Summit via Sportsfile/Flickr
- The U.S. regulator has alleged that the platforms offered unregistered securities to the general pubic in the form of the BNB token and BUSD stablecoin.
- Binance was also accused of failing to register as an exchange, and that it had comingled funds between its global and U.S. platforms.
- Bankruptcy Judge Michael Wiles gave Voyager the permission to close its $1 billion deal with Binance.US, and issue repayment tokens to affected customers.
- Judge Wiles also rejected the SEC’s arguments that the deal could potentially violate U.S. securities laws, and criticized the regulator for attacking the sale without first concluding if it was illegal.