The United States SEC enacted rules on February 6 that will compel a broader array of market participants to register with the commission, align with a self-regulatory body, and adhere to federal securities laws and regulations.
These regulations, spanning 247 pages, mark a significant shift and could lead to increased oversight over crypto and decentralized finance (DeFi) sectors.
Redefined Terms and Broadened Scope
Proposed in 2022, these rules redefine terms like "dealer" and "government securities dealer" within the Securities Act Rules. They also clarify the phrase "as a part of a regular business," as delineated in the Securities Exchange Act of 1934.
Under these new definitions, market participants who undertake significant roles in providing liquidity within the markets could be subject to these regulations.
For instance, a dealer, as per the new definitions, might demonstrate "trading interest that is at or near the best available prices on both sides of the market for the same security" or generate revenue "primarily from capturing bid-ask spreads, by buying at the bid and selling at the offer, or from capturing any incentives offered by trading venues to liquidity-supplying trading interest."
The new rules' applicability is stipulated, with dealers required to possess or control $50 million to fall under its purview.
Contentious Reception and Political Divide
The adoption of these rules transpired through a party-line vote, with the two Republican SEC members voting against them. While the 2022 proposed rule did not directly address crypto except for a single footnote in its 194-page document, it triggered objections from the crypto industry and pro-crypto politicians. In the final rule, an entire section is dedicated to crypto.
According to Coin Telegraph, in support of the rule changes, Commissioner Caroline Crenshaw highlighted the need to address existing loopholes, stating, "There is a clear loophole here: market participants with a significant share of market volume are engaging in activities like those performed by dealers, without being registered as dealers."
Future Implementation and Regulatory Impact
According to Coin Desk, the new rules are slated to come into effect 60 days after their publication in the Federal Register. This move signifies a significant regulatory shift that could reshape the landscape for various market participants, including those in the crypto and DeFi sectors.
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