SEC chairman says cryptocurrencies follow security-based swap rules

The Securities and Exchange Commission (SEC) could soon enact new rules for the regulation and registration of securities-based swaps, including cryptocurrencies.

In a speech to the Derivatives and Futures Law Committee of the American Bar Association, SEC chairman Gary Gensler outlined the changes in securities swaps for the coming year. The changes are intended to increase transparency and reduce the risk to the market. The new requirements, which will come into effect in November, include new counterparty protection, capital and margin requirements, internal risk management, regulatory agency and chief compliance officer, and validation and verification of trade receipts and records and reporting procedures. From February next year, the swap data warehouse will, for example, make data on individual transactions public.

Gensler clarifies:

“So I asked the staff to look for ways we can further increase transparency and reduce the risk of our idle agencies, especially for SEFs based on security and location reports.”

At the end of his speech, Gensler said that the trade reporting rules for cryptocurrencies would apply if the products were security-based swaps:

Make no mistake: it doesn’t matter whether it’s a security token, a security-backed security token, or any other virtual product that provides aggregated visibility of the underlying securities. These platforms – whether in the decentralized or centralized financial sector – are subject to securities laws and must function within our securities regime. “

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Any offer or sale to retail customers must be registered under the Securities Act of 1933. Gensler said the SEC will use all tools at its disposal to ensure investors are protected in these cases.

Regulations for cryptocurrencies have been a major discussion point between several US government agencies in the past few months. The chairman of the Federal Reserve was tough on the need for stricter regulations on stablecoins on July 14 and continued to discuss the possibility of a digital US dollar in front of Congress last week. A bill was also presented to Congress aimed at providing a better legal definition of digital assets and allaying fears about future regulations for blockchain-based tokens. On Monday, a meeting on stablecoins regulations led by the chairman’s working group on financial markets announced that it would make recommendations for such regulations in the coming months.