SEC Chair Emphasizes Investor Protection in Crypto Regulation

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Securities and Exchange Commission head Gary Gensler said the agency is looking into how to extend investor protections to crypto trading platforms, Reuters reported Monday (April 4).

The SEC oversight would reportedly see the agency regulating platforms on which the trading of securities and non-securities is “intertwined” through requiring them to register with the SEC, according to Gensler.

The agency plans to collaborate with the Commodity Futures Trading Commission, the sister marketing regulator, to look into platforms that trade both crypto-based security tokens and commodity tokens.

Gensler added that there might be a segregation of token custody between trading platform assets and customers’ assets — which could help stave off theft.

“The crypto market is highly concentrated, with the bulk of trading taking place on only a handful of platforms … which play roles similar to those of traditional regulated exchanges. Thus, investors should be protected in the same way,” Gensler said, adding that any token that counts as a security has to play by the same market integrity rulebook as other securities.

Reuters wrote that a lot of crypto trading comes from offshore jurisdictions, operating in a regulatory gray area because there’s no central system of oversight, allowing trading to bypass the regular banks or exchanges.

Read more: SEC: Investors Can Sue Over Inaccurate SPAC Forecasts

PYMNTS wrote that the SEC plans to propose curbing the legal protections that some special purpose acquisition companies (SPACs) have used before to make outlandish statements about the companies they want to take public.

SPACs sometimes embellish projections about the companies in order to try and get better results.

The report noted that limiting SPACs’ safe harbor from legal liability could be in line with the current rules around regular IPOs, where regulations prevent companies from giving guidance that may never happen.

Gensler said he’s raised concerns before about the blank check firms, saying the SEC is looking into disclosure inconsistencies and how investors are informed about fees.