Regulation

Regulators Say Crypto Asset Holders Subject To Securities Laws

U.S. regulators say crypto assets are commodities

U.S. financial regulators have warned firms with registered digital assets that they must follow securities laws to prevent money laundering, as well as report any suspicious activity.

The U.S. Securities and Exchange Commission, Commodity Futures Trading Commission and the Financial Crimes Enforcement Network issued the notice in order to clarify firms’ obligations under anti-money laundering, bank secrecy and counter terrorist-financing laws when it comes to digital assets.

“For the purpose of this joint statement, ‘digital assets’ include instruments that may qualify under applicable U.S. laws as securities, commodities, and security- or commodity-based instruments such as futures or swaps. We are aware that market participants refer to digital assets using many different labels,” the regulators wrote, adding that “Bank Secrecy Act obligations that apply to a broker-dealer in securities, mutual fund, futures commission merchant or introducing broker — such as developing an anti-money laundering program or reporting suspicious activity — apply very broadly and without regard to whether the particular transaction at issue involves a ‘security’ or a ‘commodity’ as those terms are defined.”

Both the SEC and CFTC have issued guidance on their positions on certain digital assets, including bitcoin and ether. And just last week, Heath Tarbert, the new chairman of the CFTC, announced that he believes ether is a commodity, so it falls under the jurisdiction of his agency.

“We’ve been very clear on bitcoin: bitcoin is a commodity. We haven’t said anything about ether — until now,” Tarbert said at Yahoo Finance‘s All Markets Summit in New York City. “It is my view as chairman of the CFTC that ether is a commodity.”

Controversy has surrounded cryptocurrencies because of its use in money laundering and terrorism funding. Earlier this year, U.S. Secretary of State Mike Pompeo stated that bitcoin needs to be as highly regulated as SWIFT.

“Look, the risk with anonymous transactions is one that we all know well. We know this from 9/11 and terror activity that took place in the 15 years preceding that where we didn’t have good tracking, we didn’t have the capacity to understand money flows and who was moving money,” Pompeo said in an interview in August.

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