On March 7, 2018, the U.S. Securities and Exchange Commission (SEC) released a public statement on potentially unlawful online platforms for trading digital assets. The statement addresses certain risks and considerations for investors using online trading platforms and for market participants operating online trading platforms.
The SEC claims that many of these platforms facilitate the trading of assets that meet the definition of a “security” under federal securities laws. If a platform offers trading of digital assets that are securities and operates as an “exchange” under federal securities laws, then the platform is required to register with the SEC or operate under an exemption from registration.
The statement stresses that investors should only use a platform that operates as a national securities exchange, alternative trading system (ATS), or broker-dealer when trading digital assets that are securities in order to benefit from numerous safeguards and protections available through SEC supervision. Investors also should not allow themselves to be misled into believing that an online trading platform meets the regulatory standards of an SEC-registered exchange, regardless of any potentially assuring claims made by the platform. In this regard, the statement provides a list of questions investors should ask before they decide to trade digital assets on an online trading platform.
The statement also stresses that platform operators should understand and comply with the many rules, regulations, policies, and procedures required of an exchange under federal securities laws. And, even if the platform may not meet the definition of an exchange under federal securities laws, the operator should understand that the facilitation of trading or other services related to digital assets that are securities, such as digital wallet services, may trigger other registration requirements under federal securities laws, including broker-dealer, transfer agent, or clearing agency registration. Furthermore, a platform that offers digital assets that are securities may be taking part in the unregistered offer and sale of securities if those securities are not registered or exempt from registration.
A full version of the statement is available here.
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