New SEC Report: Cryptocurrency Exchanges Trading Security Tokens Must Register

The Securities and Exchange Commision (SEC) has issued a new report warning about the dangers of unregulated crypto exchanges and stated that all trading platforms exchanging digital assets that are considered securities must register with the SEC.

 Does That Mean ALL Exchanges Have to Register with the SEC?

On March 7, 2018, the U.S. Securities and Exchange Commision (SEC) published a new report regarding the current state of cryptocurrency exchanges and the potential risks for investors. The report states that some ICOs, digital assets, and cryptocurrencies could be classified as “securities” and thus each trading platforms that exchange them must register with the SEC and comply with necessary regulations. The report states:

If a platform offers trading of digital assets that are securities and operates as an ‘exchange,’ as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.

The SEC is concerned that different parties could conduct illicit or fraudulent trading through un-registered exchanges that trade these “securities”. Even if an exchange only allows trading of high-quality cryptocurrencies, the SEC or other regulatory agencies do not control which coins are eligible for trading.

Cryptocurrency Traders Should Be Careful with Exchanges

The report also warns that most cryptocurrency exchanges may not fully comply with all regulatory measures and may not offer proper support or protection in the event that the exchange gets hacked or users lose funds. The trading engines of cryptocurrency exchanges may also not guarantee to provide accurately trading data if they are not registered and reviewed by the SEC.

Lastly, many of these platforms give the impression that they perform exchange-like functions by offering order books with updated bid and ask pricing and data about executions on the system, but there is no reason to believe that such information has the same integrity as that provided by national securities exchanges.

The SEC also advises investors and traders to properly check if a cryptocurrency exchange is registered, regulated, reliable and open to all users.

What are your thoughts on SEC’s new published report? Do you think that all cryptocurrency exchanges should register with the SEC? Let us know in the comments below!

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