The U.S. crypto industry may soon receive a boost from a temporary regulatory framework. The acting SEC chair, Mark Uyeda, suggested that this fast-tracked system could support innovation while permanent laws remain in progress.
This plan arises as federal regulators are still examining the fast rise of crypto trading. It developed in a decentralized manner. It began outside of any official supervision.
Early on, the needs of users were matched by platforms without the intervention of national regulators. Gradually, state authorities intervened and imposed money transmitter legislation on these platforms.
Crypto licensing challenges and solutions
That created a patchwork of rules, varying by state. Companies now must deal with numerous licenses from state to state. That patchwork approach has its limitations.
A unified national approach can be more efficient. Companies could have one SEC license for both crypto assets and tokenized securities. That will be simpler than obtaining numerous state-level licenses.
Nevertheless, there are challenges. The federal regulations only permit exchanges to quote registered securities. Many of the tokenized assets are not registered. This places them beyond the ambit of the country’s securities exchanges.
Limitations of traditional rules in crypto
In addition, certain rules, such as the order protection rule, will not function in crypto environments. Tokenized and non-tokenized assets tend to move within different mediums on blockchain and traditional infrastructures. That renders compliance difficult.
Crypto exchanges operate differently from traditional exchanges, too. Most of the crypto trading platforms have everything, trading, clearing, and holding assets, on one platform. Securities laws, by comparison, require that there be different systems for these. That creates more regulatory issues.
All these problems notwithstanding, blockchain has the potential to enhance trading infrastructure. It has the ability to accelerate settlement and clearing. It can assist businesses in using capital more effectively.
Trades are possible round the clock with smart contracts, without any intervention. None of these instruments figured in the initial securities legislation. Now, regulators have had to adjust for them.
While full regulation will be time-consuming, Uyeda favors a stopgap measure. An interim, provisional framework could authorize developers to test blockchain-based systems in a legal capacity. That could make U.S. innovation competitive. Participants are invited to propose where exemptions could be of benefit.
