January 18, 2022

Volume XII, Number 18

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January 18, 2022

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SEC Releases Statement on Platforms Trading Digital Assets

On March 7, the Securities and Exchange Commission released an advisory regarding platforms used to trade digital assets. The SEC expressed concern that, in light of the rise in popularity of trading digital assets, including coins and tokens in initial coin offerings, investors could mistakenly believe that platforms used to trade such assets are registered with the SEC or are otherwise regulated.  In order to protect investors, the SEC indicated that it plans to focus on such platforms and their compliance with federal securities laws.

One section of the SEC’s statement is directed towards investors. The SEC notes that many platforms refer to themselves as “exchanges,” which does not necessarily mean such platforms are regulated or that information from such platforms has the same integrity as information from registered exchanges.  The SEC encourages investors to use registered platforms or entities, such as national securities exchanges, alternative trading systems and broker-dealers, to obtain the protections of federal securities laws and SEC oversight.

The second section of the SEC’s statement addressing market participants that operate online platforms cautions such persons that, depending on whether the digital assets traded on such platforms are considered securities, SEC exchange registration requirements or requirements associated with operating as an alternative trading system may be triggered. The SEC also noted that trading platforms may not be considered exchanges under federal securities laws, but may be required to register in another capacity, such as a broker-dealer, transfer agent or clearing agency, depending on the functions they perform.

The SEC’s announcement is available here.

©2022 Katten Muchin Rosenman LLPNational Law Review, Volume VIII, Number 68
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About this Author

Our Financial Services Practice advises a broad spectrum of domestic and international fund managers, trading advisors, banks, brokerages and proprietary trading firms in all aspects of exchange-traded and over-the-counter commodities, securities and derivatives transactions. We help clients find business-based solutions and make business-driven decisions that are in compliance with applicable regulatory requirements. Our lawyers have extensive experience in the financial markets and are fully attuned to the need to provide advice quickly and efficiently in light of the time-sensitive and...

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