The Securities and Exchange Commission (SEC) has saidÃÂ digital security exchanges that ensure assets on their books are legitimate in origin can continue to operate unhindered.
- In a letter to a senior executive at the Financial Industry Regulatory Authority (FINRA), Wall StreetÃ¢ÂÂs self-regulatory body, the SECÃ¢ÂÂs trading and markets division said exchanges that go to lengths to comply with existing regulation will not face sanctions.
- As well as conforming to federal securities law, the SEC, which has jurisdiction over FINRA, said such entities will need to introduce procedures that assess if listed digital securities have been sold legitimately throughout their lifetimes.
- This includes checking the initial offering was either properly registered or came under a valid exemption, as well as ensuring secondary market transactions are also compliant.
- The SECÃ¢ÂÂs clampdown on initial coin offerings (ICOs) means it is often characterized as the industryÃ¢ÂÂs boogeyman.
- But as the tokenized version of an already heavily regulated asset class, digital security offerings already largely comply with federal law.
- Thus, issuers have already used some of the exemptions allowing them to host a sale without first registering as a public company.
- Indeed, in recent months, the SEC has made steps to better accommodate these sorts of offerings. It published a proposal in March to increase the amount startups can raise under an SEC exemption.
- In the summer, an SEC-registered broker-dealer unveiled plans to launch the first security token platform that can also be used to host compliant offerings.
- FINRA itself has made tentative moves to move forward with the security token industry and just this month approved tZEROÃ¢ÂÂs plans to launch a retail-focused broker-dealer.
- As the crusade against unregulated ICOs fades, U.S. regulators, the SEC in particular, may well be preparing the ground for a host of compliant digital security offerings.
Read the letter in full here:
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.