The Securities and Exchange Commission (SEC) could soon enact new rules for the regulation and registration of securities-based swaps, including cryptocurrencies.
Speaking to the American Bar Association’s Derivative and Futures Law Committee, SEC chairman Gary Gensler outlined the changes that will come to security-based swaps over the next year. The changes are intended to increase transparency and reduce the risk to the market. The new requirements, which will come into effect in November, include new counterparty protection regulations, capital and margin requirements, internal risk management, supervisory and chief compliance officers, deal confirmation and confirmation, and record keeping and reporting procedures. From February next year, for example, swap data repositories will disclose data on individual transactions to the public.
Gensler made it clear:
“That’s why I asked the staff to think about ways we can further increase transparency and reduce the risk of our unused powers, particularly with regard to security-based SEFs and position reports.”
Towards the end of his speech, Gensler said that the trade reporting rules for cryptocurrencies will apply if the products are security-based swaps:
Make no mistake: it doesn’t matter whether it’s a stock token, a securities backed value token, or any other virtual product that offers synthetic exposure to underlying securities. These platforms – whether in the decentralized or centralized financial sector – are subject to securities laws and must function within our securities regime. “
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Any offer or sale to retail customers must be registered under the Securities Act of 1933. Gensler said the SEC will use all tools at its disposal to ensure investors are protected in these cases.
Regulations for cryptocurrencies have been a major topic of conversation with a number of US government agencies over the past few months. The chairman of the Federal Reserve took a hard line on July 14th regarding the need for stricter regulations on stablecoins and discussed the possibility of a digital US dollar in front of Congress last week. A bill was also tabled in Congress to better define digital assets legally and to reduce fear of future regulations regarding blockchain-based tokens. On Monday, a meeting of the president’s financial markets working group on stablecoins regulations announced that it was expecting recommendations for such regulations in the coming months.