Oct. 28, 2023
The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been in a conflict over who has jurisdiction over digital assets. The SEC claims that digital assets are securities, while the CFTC claims that they are commodities. This lack of regulatory clarity has been a major barrier to the growth and adoption of digital assets. If the proposed SEC rule on ATSs were to apply to digital assets before the CFTC-SEC conflict is resolved, it could have a number of negative consequences. First, it could create uncertainty and confusion for market participants. It would be unclear which agency's rules apply to digital assets, and companies could face conflicting requirements. This could discourage investment and innovation in the digital asset space. Second, applying the SEC's proposed rule to digital assets before the CFTC-SEC conflict is resolved could give the SEC too much power over the market. The SEC is a securities regulator, and its rules are designed to protect investors in traditional securities markets. Digital assets are a new and different asset class, and the SEC's rules may not be well-suited to them. Applying the SEC's rules to digital assets could lead to overregulation and stifle innovation. Third, applying the SEC's proposed rule to digital assets before the CFTC-SEC conflict is resolved could harm investors. The SEC's rules are complex and expensive to comply with. Small businesses and startups may not be able to afford to comply with the SEC's rules, which could force them out of the market. This would reduce competition and innovation in the digital asset space. For all of these reasons, the SEC's proposed rule on ATSs should not apply to digital assets until the CFTC-SEC conflict is resolved. Specifically, here are some arguments how the proposed SEC rule on ATSs could harm investors in the digital asset space: The proposed rule could lead to increased costs and compliance burdens for ATSs that trade digital assets. This could force some ATSs to exit the market, reducing competition and choice for investors. The proposed rule could give the SEC too much power over the digital asset market. This is concerning because the SEC has a history of being hostile to digital assets and innovation. The proposed rule could lead to overregulation of the digital asset market. This could stifle innovation and make it more difficult for new entrants to compete. Overall, the potential risks of applying the SEC's proposed rule on ATSs to digital assets before the CFTC-SEC conflict is resolved outweigh the potential benefits.