US SEC Floats New Rules for Securities Based Swaps

The United States Securities and Exchange Commission (SEC) has been in the headlines for the past few days and today, the markets regulator has announced the introduction of new rules to prevent fraud on Securities-Based Swap (SBS) entities.

According to the release from the SEC, in addition to preventing fraud, the new rules help ward off every form of manipulation and deception in connection with security-based swap transactions. The commission also adopted a "rule to prohibit undue influence over chief compliance officers at certain security-based swap entities."

With so much responsibility lying on the shoulders of SBS entities’ Chief Compliance Officers, the new rules from the market regulator frowns at any action targeted at coercing or manipulating these officials in the discharge of their duties in line with the extant securities laws.

"Any misconduct in the security-based swaps market not only harms direct counter-parties but also can affect reference entities and investors in those reference entities," said SEC Chair Gary Gensler, "Given these markets’ size, scale, and importance, it is critical that the Commission protect investors and market integrity through helping prevent fraud, manipulation, and deception relating to security-based swaps. Today's set of rules will do just that."

Though the SEC is a regulator for the broad financial markets in the United States, the recent rules guiding SBS trading platforms may also apply to the crypto ecosystem.

With the regulator filing lawsuits against Binance and Coinbase exchanges this week for supporting the trading of cryptocurrencies which it tagged as securities, these and other entities trading these digital assets will have to take note of the new provisions.

As many as 67 cryptocurrencies are now tagged as securities by the SEC, a classification that now impacts some of the industry's biggest coins including but not limited to Cardano (ADA), Solana (SOL), Filecoin (FIL) and Polygon (MATIC). The securities designation ultimately implicates any exchange that supports their trading activities.

The new regulatory position of the SEC is bound to unsettle the deep liquidity that these cryptocurrencies enjoy at the moment. For instance, commission-free brokerage Robinhood is now contemplating delisting some of the cryptocurrencies tagged as securities by the SEC. Despite the latest rules published, the crypto market may remain unsettled in the short term.

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