US SEC will not take enforcement action against crypto brokers for five years

The U.S. Securities and Exchange Commission (SEC) announced on Wednesday that it will allow brokers specializing in crypto assets to operate for five years without fear of enforcement action, but the prerequisite is that crypto asset brokers need to be able to prove that they own and control their customers' digital asset securities.

According to the SEC’s release, it is seeking feedback on the proposal, which suggests the agency may back down on allowing crypto custodians to become regulated broker-dealers specifically for digital assets.

In the statement, the SEC said, “As discussed below, the SEC’s position in this statement is premised on the assumption that broker-dealers limit their business to digital asset securities to isolate risk and to develop policies and processes to evaluate the distributed ledger technology underlying specific digital asset securities and to safeguard the private keys required to transfer digital asset securities.”

Industry insiders generally welcomed the SEC's announcement, believing it was a step in the right direction.

Caitlin Long, CEO of Wyoming-based crypto bank Avanti Financial, said on Twitter that “this move by the SEC is positive because it is enabling, not restrictive.”

Stepping back, the SEC has been accused of blocking efforts by digital asset custodians to become regulated broker-dealers. Obtaining broker-dealer registration would allow these firms to offer securities trading in the U.S., including security tokens.

Carlos Domingo, CEO of Securitize, said this was “potentially very good news” for brokers operating in the security token space.

The SEC said in a statement Wednesday that it wants public feedback on how companies can effectively comply with the rule. “As an interim measure,” it is creating a five-year safe harbor where companies can offer broker-dealer services under a set of certain conditions.

The SEC said its five-year deadline will give the agency a chance to better understand how to regulate the sector. The statement will be published in the Federal Register and take effect 60 days later.

Image source: SEC

AuthorLiang Che

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