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- 1 The US SEC announced a new definition for government securities dealers.
- 2 The new framework is based on security trading activities, not the type of traded security.
- 3 The new definition is supposed to shake the Decentralized Finance (DeFi) world.
The legal war between the US Securities and Exchange Commission (SEC) and cryptocurrency continued. Recently, the government agency widened its definition of a dealer to include more financial operations in its area. The purpose is to formalize the management of cryptocurrency firms by offering them a set of rules.
Let’s delve into the legal war between the SEC and the crypto market and the newly announced rules for dealers.
SEC’s Forever War in Crypto Market
The announcements and actions of the SEC always put the crypto industry on notice and influence the crypto market as well. With the motive to deal in crypto securities, the agency is in continuous legal war with the crypto market.
Numerous federal agencies have played a key role in policing crypto trading & the SEC, in 2024, is marketing its seventh war to regulate cryptocurrencies.
Additionally, Gary Gensler, the Chainman, asserted that almost all the products are considered securities that the agency regulates, and the success of Clayton in 2021 best represents this. Also, the Commission took around 26 cryptocurrency enforcement actions in 2023 alone.
The agency recently announced rules for government securities dealers and is supposed to stir the DeFi market.
Rules for Dealers and Government Securities Dealers
The SEC created a new definition for dealers to operate with more financial services and manage crypto securities. Also, the Commission has not excluded any specific type of securities from applying final regulations.
The Commission disclosed two main rules for individuals engaging in the crypto market as a dealer and offering facilities like liquidity. The motive is to safeguard investors and promote market resilience, transparency, and integrity.
Based on the final rules under Exchange Act Rules 3a5-4 and 3a44-2, an individual must register with the Commission under Section 15(a) or 15C. Along with this, the dealer needs to become a member of an SRO and comply with federal securities laws and regulatory obligations. Sections 3(a)(5) and 3(a)(44) of the Securities Exchange Act of 1934 help identify activities that would cause individuals to engage in such actions.
Moreover, the proposed rules should not involve DeFi, whether the dealer is involved in the transaction, structure, or analysis. Additionally, the new rules will likely influence DeFi as most DeFi operations could find registering compliance with SEC demands challenging.
In addition to this, the Commission also suggested demanding investment advisers uphold the customer’s digital assets with “qualified custodians.”
What’s the Need?
As the crypto market grows, the number of scams, frauds, and illegal activities is booming. To safeguard investors from such scams and unethical scams, the Commission continuously comes up with new rules in the crypto space.
Recently announced rule could be a blow for US DeFi or more than that. The goal is to formalize the management of cryptocurrency firms by making them concede with the same regulations as all other securities exchanges.
Furthermore, registering the dealers with the Commission will safeguard investors and promote market transparency, resilience, and integrity. In addition, the continuous fight of the SEC will prevent fraud, increase information disclosure to crypto holders and investors, and reduce market manipulation.
The SEC’s aggressive enforcement actions will change the cryptocurrency market’s working.
Conclusion
In the continued war with the crypto market, the US Commission announced a new definition for the dealers or government security dealers. Under Exchange Act Rules 3a5-4 and 3a44-2, the dealer is required to register with the Commission under Section 15(a) or 15C. Becoming an SRO member and complying with federal securities laws and regulatory obligations will help a dealer operate smoothly in the crypto world. The motive is to safeguard investors and promote security, transparency, and integrity.
FAQs
Who are dealers in the legal crypto market?
Digital asset firms that are trading more than government securities or assets that the government categorizes as securities are termed dealers.
What is the role of the SEC?
The Commission oversees securities exchanges, investment advisors, securities brokers and dealers, and mutual funds to promote fair dealing.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
