Crypto exchanges have long asked for clearer guidelines about what coins and tokens they can list. They may be about to get a double dose.
In comments today at the University of Pennsylvania Carey Law School, U.S. Securities and Exchange Commission Chair Gary Gensler said that he's asked his staff to work with the Commodity Futures Trading Commission to find ways to "register and regulate platforms where the trading of securities and non-securities is intertwined.”
As its name suggests, the SEC is tasked with regulating securities, which are investment products such as shares and bonds that people buy with the expectation of earning a return.
The CFTC, on the other hand, regulates commodity futures—financial instruments that allow people to buy and sell commodities at a later date at a predetermined price. (In most cases, the actual commodities never transfer but are instead settled in cash; these futures are used to hedge positions in case an asset price dramatically rises or falls.)
While the SEC and CFTC have traditional assets well covered, Brett Harrison, CEO of crypto exchange FTX US, told Decrypt, "What makes crypto interesting is… that the assets aren't very clearly defined as to what sort of asset class bucket they fall into."
Indeed, the SEC has, for example, claimed XRP is a security while historically declining to extend that designation to Bitcoin or Ethereum. Gensler has said that many tokens on the open market may be securities—but not which ones.
A joint SEC-CFTC registration and regulation process would, perhaps, eliminate some confusion by giving exchanges a single regulatory authority to turn to.
Harrison is pushing for a "clear registration process for tokens" so that everyone knows they can safely offer a token for trading without the hammer coming down after the fact; crypto projects have, in the past, criticized the SEC for regulating via enforcement actions.
"I think a lot of token products out there would happily register with the SEC or the CFTC or both or neither if they knew that would get them on to exchanges in a licensed, regulated way," said Harrison. "The problem is there's not a clear path right now."
A March executive order from President Biden is aimed at clearing up the mess. Among other things, it puts the SEC, CFTC and other agencies to work reporting on ways to protect consumers and "strengthen market integrity."