The U.S. Securities and Exchange Commission (SEC) unveiled rules for broker-dealers in the tokenised securities space. The regulator promised not to sue them for five years.
SEC issues statement and requests comment regarding the custody of digital asset securities by special purpose broker-dealers https://t.co/IXYCDgqhiu
— SEC_News (@SEC_News) December 23, 2020
The Commission says that broker-dealers perform the full range of intermediary functions with respect to digital assets, and their activities are subject to oversight by the SEC and the Financial Industry Regulatory Authority (FINRA).
According to SEC expectations, broker-dealers must disclose risks to clients and implement “policies and procedures reasonably designed to mitigate risk.” In the brokers’ written policies, an assessment of risks associated with the assets and underlying technologies must be set out.
They must also develop contingency plans for emergencies, including a hard fork, a 51% attack, theft, or unauthorized use of keys.
If firms comply with these rules, the SEC promises not to sue them for five years. The agency acknowledges that the technical requirements for transactions and custody of digital securities differ from those for traditional securities, and that the market is still developing.
Commissioner Hester Peirce, known as the “Crypto Mom”, has already called the rules “guidance”.
New guidance on custody of digital asset securities. Baby steps: https://t.co/o8TcKMlDGp pic.twitter.com/7qzDXl49uv
— Hester Peirce (@HesterPeirce) December 23, 2020
The SEC has solicited comments from industry representatives on custody standards for digital asset securities.
“By soliciting comments from industry participants, the regulator seeks to minimise risks to investors and other market participants in tokenised securities,” the statement said.
The regulator expects that the five-year window will create an environment in which firms develop leading practice.
In Hester Peirce’s view, the cryptocurrency industry is in need of ‘progressive’ rules, as the Commission’s existing regulatory framework is capable of integrating such an innovative space as cryptocurrencies.
She believes, that regulators should find ways to adopt the principles of personal freedom underlying digital assets, and to do away with excessive rules.
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