SEC announces new Crypto Regulation Initiatives

SEC announces new Crypto Regulation Initiatives

The global crypto market is hovering around a value of $2 trillion. Accordingly, the SEC has announced new initiatives for Crypto market regulations so that it is able to provide an additional layer of protection to crypto investors.

While SEC’s move could be viewed by some experts as a positive development leading to the adoption of crypto as a legitimate system and bringing it mainstream, however, the core idea behind SEC’s crypto regulations is to improve investor protection as well as keep an eye on preventing the misuse of crypto assets, besides preventing money laundering via crypto.

Key Changes

One of the major changes that the regulator is looking at as part of SEC crypto regulations is to separate the custody of assets and minimise the risk for investors. 

In investment banking and other traditional setups, the intermediary does not hold control of the investor’s assets. Unlike them, the crypto exchanges keep custody of the client assets. Any hack or fraud by the scammers may result in erosion or loss of investor capital. 

In 2021, scams and frauds cost investors around $14 billion. To this end, the SEC is looking to register and regulate the crypto exchanges and platforms.

In another initiative for SEC crypto market regulations, the SEC will be partnering with the Commodity Future Trading Commission (CFTC). Together they will monitor the platforms that undertake the trading of crypto and commodity tokens.

As per the SEC chairman, the idea behind these initiatives is that the SEC considers the crypto tokens at par with the other securities prevalent in the traditional market. SEC also believes in the need to treat the crypto exchanges at par with the intermediaries of conventional securities. 

The crypto platforms are using a different technology though. But that does not mean they should receive different treatment. After all, they are offering a similar service, as per the inference drawn by the SEC chairman.

The Context

The crypto market has recently seen its size swell to a mammoth $2 trillion. The financial authorities’ increased regulatory scrutiny has accompanied this explosive market growth.

In March 2022, the Biden administration passed an executive order asking government agencies to examine the risks and opportunities posed by cryptocurrencies closely. Experts see this White house push last month as the reason behind the latest SEC crypto market regulations initiatives. 

Impact on Investors

Depending on which side of the table you are, these developments may mean different things. 

Part of the appeal of crypto has been the non-applicability of regulation and independence from intermediary entities. Until now, this aspect has been able to elude regulation by the Securities Exchanges Commission and United States Department of Treasuries (USDT). 

Due to upcoming SEC crypto regulations, some investors might be wary about the changes due to increased scrutiny. However, some experts positively interpret this move by the Biden administration and regulators. They believe that it indicates that the US government is moving towards legitimising crypto and bringing it to the mainstream.

On the other hand, the crypto industry is in its infancy. At this stage, any new SEC crypto regulations may have a considerable impact on the investor’s wallet.

The SEC is still not very forthcoming on the exact time when the SEC crypto regulations will come into effect as well the timeline for implementation. However, we can expect the following implications of the recent announcements.

  1. An increased level of market stability

Many experts believe that the SEC crypto regulations will bring about much-needed price stability and reduce the volatility in the crypto markets. 

It will prevent fraudulent activities in the crypto universe, leading to an increased level of investor protection. It will also clear guidelines for the organisations to operate in the crypto universe.

  1. Increased Investor Protection

With the new SEC crypto market regulations coming up, the investors will be able to transact and invest in crypto with a reduced level of risk in terms of frauds and scams. Investors can stay assured that it is not a free for all, as some of them perceive. 

The fundamentals of investing are the same as other asset classes. Investors should prefer the crypto assets with a long past track record like Bitcoin or Ethereum over relatively unknown newer assets.

As an investor, you are also responsible for the risk you take. Hence, you should invest as per your risk profile and after deciding your risk tolerance level.

Final Words

Any new developments, especially in the regulatory landscape, bring apprehensions. However, on the positive side, SEC crypto market regulations will mean mainstream acceptance for crypto. However, if you want to enjoy a secure and seamless trading experience then log in to zebpay and embark on an exciting journey in crypto investing.


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