Crypto Regulation by The SEC: Implications for Investors, Exchanges, and Stablecoins
The crypto market is growing and expanding, making regulations more and more necessary. To protect digital asset investors from fraudulent activities, the Securities and Exchange Commission (SEC) is enacting regulations to protect investors. While some believe more regulation will help the industry achieve its full potential, others worry it will stifle innovation.
What Is The Security And Exchange Commission?
The U.S. Securities and Exchange Commission, or SEC, a federally mandated organisation founded in 1934, works to safeguard investors from dishonest or manipulative practices by market participants and maintain equity in America’s securities markets. By approving registration statements for book-runners among underwriting firms and offering comprehensive disclosure guidelines on domestic corporate takeovers, it also contributes to capital formation.
SEC’s Operating Procedure
SEC promotes equitable and transparent markets for investors nationwide by enforcing compliance with relevant laws, rules, and regulations by individuals and organisations operating in the securities industry. Their EDGAR database enables buyers who are apprehensive to obtain registration statements, periodic financial reports, and other essential forms for a secure investing experience.
SEC’s Effect on the Crypto Market
The way the cryptocurrency markets function will be impacted for years to come by the SEC’s significant enforcement drive. Three big developments that could drastically change how investors interact with these technologies are anticipated shortly.
- Regulation Could Impact New Coins
In 2017, the SEC concluded that tokens distributed through initial coin offerings were securities. Three years later, the SEC sued Ripple Labs Inc. for allegedly breaking federal security laws over the sale of the XRP token, which was offered without adhering to rules regarding disclosures and registration requirements.
Furthermore, in August 2021, the SEC settled with the DeFi Money Market regarding purported transactions of over $30 million in digital tokens that were not registered as securities, marking the start of the SEC’s first enforcement action in the decentralised finance space.
- Exchanges May Be Required to Register as Broker-Dealers
To shield investors from unscrupulous practices like front running, wash trading, and freezing customer balances, Senator Gensler has pushed cryptocurrency exchanges to register as securities exchanges. This endeavour seems even more urgent in light of the startling $14 billion worth of assets stolen last year alone due to inadequate cryptocurrency custody procedures.
- Stablecoins Might Be Examined More
Authorities draw attention to the increasing prevalence of stablecoins—Blockchain tokens with a fixed value relative to fiat money. These assets must be supported by sizeable reserves held in cash-based or low-risk instruments like treasuries to maintain this peg and safeguard users’ investments.
The Bottom Line
According to Chairman Gensler, the SEC has recently resolved several disputes about cryptocurrencies to support the increased protection of investors in American securities markets. Even though the SEC has taken enforcement action against a few cryptocurrency players in the past, more cases may arise as stablecoins and decentralised finance become more prevalent in today’s markets.
