Cryptocurrency General News

SEC Director Is Surprised Cryptocurrency Exchanges’ Lack of Self-Reporting Enthusiasm

SEC Director Is Surprised Cryptocurrency Exchanges’ Lack of Self-Reporting Enthusiasm

The Director of trading and markets division of Securities and Exchange Commission (SEC), Brett Redfearn, is not happy with the response of the cryptocurrency exchanges. In fact, he was surprised that the digital coin exchanges were not showing any enthusiasm for self-reporting after the regulator made it very clear that any digital asset or coin or virtual currency is security. The lack of enthusiasm could naturally raise doubts about the practices adopted by such exchanges, which is not good for the market’s health.

More Regulations

Earlier, the regulator indicated that every cryptocurrency exchange in the United States that are dealing with virtual currency trading should register with the SEC. That has also effectively put to rest the differences between the stock market regulator and the commodities market regulator on treating the digital asset. Yet, Redfearn could not see enough enthusiasm coming from the exchanges on the self-reporting aspect. He was airing his opinion during the Sandler O’Neil Global Exchange and Brokerage Conference. The regulator has become more watchful after most of the cryptocurrencies price hit their lifetime high towards the end of December last year. That forced it to bring initial coin offerings (ICOs) under its scanner.

The SEC director pointed out a number of digital currency exchanges that see ICOs trading. He cautioned that he would not mind announcing more regulations. Obviously, this is meant to restrict the volatility in prices and that only genuine players enter the fray and eliminate any wrongdoers, CNBC reported. Earlier at the conference, the regulator’s Commissioner, Jay Clayton, has reiterated its stand that any instrument of the fundraising process, be it digital assets or tokens or ICOs, are securities only.

Clayton indicated that the agency would not only regulate the offering of the security but would also engage itself in regulating that security trading. The “Howey Test” is adapted to determine whether an asset is security. According to the Supreme Court’s observation in 1946, security is nothing but an investment of money. This included common enterprise where investor bets gain mainly due to the efforts put in by others.

Redfearn pointed out that “We’ve created this pronged test, the Howey Test, where people look at the different characteristics and determine if it’s a security. Quite frankly not all of them are obvious on its face exactly what it is.” The director indicated that the agency would continue its efforts to clarify and that more statements would come on the topic though he did not disclose the timing.

Popular Digital Currencies

However, Redfearn was not ready to clarify on popular digital currencies like XRP or ethereum as securities. On the other hand, he indicated that there would be statements on the forthcoming products. Interestingly, some of the virtual assets were linked with Ripple, and they have made a case for arguing it to treat under a different category.

Also, they have argued that due to the utility nature, they should be treated differently. In any case, the cryptocurrency is in its nascent stage and that the SEC would continue to regulate it.

About the author

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Eric Ravenscraft

Eric Ravenscraft is a freelance writer from Atlanta covering tech, media, and geek culture for Medium, The New York Times, and more.

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