- The US SEC has established a new set of rules targeting Securities-Based Swap (SBS) entities, aiming to prevent fraud and manipulation.
- Given that many cryptocurrency exchanges operate as SBS platforms, these rules may significantly impact the crypto industry, with 67 digital currencies now classified as securities by the SEC.
In a move to protect the integrity of the financial market, the United States Securities and Exchange Commission (SEC) has announced a new set of guidelines aimed at preventing fraudulent activities and manipulative behavior within Securities-Based Swap (SBS) entities.
The SEC’s freshly minted regulations are specifically designed to shield investors and bolster market integrity by preventing deceit, manipulation, and fraud relating to security-based swaps. In addition, these rules are set to prohibit any unjust influence over Chief Compliance Officers of certain SBS entities, who shoulder considerable responsibility.
“Misconduct in the security-based swaps market harms not only direct counter-parties but also reference entities and investors in those reference entities,”
SEC Chair Gary Gensler stated. He further emphasized the importance of these regulations in protecting investors and maintaining market integrity in a sector of notable size, scale, and significance.
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These regulatory changes have potential implications for the burgeoning cryptocurrency industry, given that several crypto exchanges fall under the category of SBS platforms. The new rules come at a critical juncture when the SEC has filed lawsuits against renowned crypto exchanges such as Binance and Coinbase for facilitating the trade of digital assets deemed as securities.
A total of 67 cryptocurrencies, including well-known digital currencies such as Cardano (ADA), Solana (SOL), Filecoin (FIL), and Polygon (MATIC), are now classified as securities by the SEC. This classification significantly impacts exchanges supporting their trading activities and will likely influence how these platforms operate going forward.
The SEC’s repositioning promises to disrupt the substantial liquidity enjoyed by these cryptocurrencies. As an example, Robinhood, the commission-free brokerage, is considering delisting some digital currencies tagged as securities by the SEC. Although the regulations are designed to bring clarity and safeguard the market, they might create temporary instability within the cryptocurrency sector.
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