PANews reported on May 8 that Hester Peirce, Commissioner of the U.S. Securities and Exchange Commission (SEC), disclosed that the SEC Cryptocurrency Working Group is studying a potential registration exemption plan to allow companies to issue, trade and settle securities through distributed ledger technology (DLT). This exemption will exempt some SEC registration requirements and support companies to use innovative trading systems to process qualified tokenized securities.
The exemption mechanism comes with strict conditions: the exempted entity will comply with market integrity conditions to prevent fraud and manipulation. Other conditions may include requirements to provide users with significant and relevant disclosures about the platform's products, services, operations, conflicts of interest, and risks (including smart contract risks); comply with recordkeeping and reporting requirements; be subject to supervision and inspection by SEC staff; and have sufficient financial resources for operations. Additional requirements for participants providing cryptocurrency custody services may include disclosure of custody arrangements and risks to customers and requirements to implement policies and procedures or substantive requirements related to blockchain and wallet security. Restrictions such as limiting the number and type of tokenized securities listed or traded or the trading volume can reduce risks for investors and the market. The SEC can increase these caps for companies that successfully operate under their initial restrictions.
