- The United States Securities and Exchange Commission (SEC) has adopted new rules that would require more market participants in the crypto industry to register with the SEC and comply with federal securities laws.
- The rules were proposed in 2022 and were met with criticism from the crypto industry and opposition from Republican SEC commissioners.
- The new rules redefine terms such as “dealer” and “government securities dealer” and aim to bring more oversight to market participants who have significant liquidity-providing roles.
- The rules would apply to those who express trading interest at or near the best available prices on both sides of the market and earn revenue primarily from bid-ask spreads or incentives offered by trading venues.
The adoption of these new rules by the SEC is aimed at bringing more regulation and oversight to the crypto industry. By requiring more market participants to register with the SEC and comply with federal securities laws, the SEC aims to protect investors and ensure market integrity. However, the rules have faced criticism from the crypto industry, with concerns about stifling innovation and hindering the growth of decentralized finance.
The redefinition of terms like “dealer” and “government securities dealer” broadens the scope of who would be subject to these regulations. Market participants who engage in significant liquidity-providing roles will now fall under the purview of the SEC. This includes those who provide liquidity by expressing trading interest at or near the best available prices on both sides of the market and earn revenue from bid-ask spreads or trading incentives.
The adoption of these new rules by the SEC is not surprising given Chair Gary Gensler’s previous statements about the need for more regulation in the crypto industry. While increased oversight can provide a level of protection for investors, it is also important to strike a balance and ensure that regulation does not stifle innovation. The crypto industry will need to adapt to these new rules and find ways to comply while continuing to innovate and drive the adoption of decentralized finance.