SEC eyes crypto trading overhaul amid calls for reform

The U.S. Securities and Exchange Commission (SEC) has signaled a potential overhaul of crypto trading regulations, emphasising the need for federal oversight and stronger investor safeguards.

This move comes as policymakers, regulators, and industry leaders gathered for the SEC’s Crypto Task Force roundtable on April 11, titled “Between a Block and a Hard Place: Tailoring Regulation for Crypto Trading.”

Acting SEC Chairman Mark T. Uyeda highlighted the inefficiencies of the current state-by-state licensing framework for crypto platforms, advocating for a more cohesive federal approach to accommodate innovation and protect investors.

Uyeda noted that early U.S. securities markets evolved organically, much like today’s crypto markets, and encouraged market participants to provide input on where regulatory flexibility might be necessary to support blockchain-based trading innovations.

Commissioner Caroline A. Crenshaw emphasised the risks posed by crypto trading platforms, particularly regarding unclear custody and registration practices.

She pointed out that these platforms often bundle services like brokerage, clearing, and custody under one roof, contrasting with traditional finance structures where functions are separated to minimise conflicts of interest.

Crenshaw raised concerns about investors misunderstanding existing safeguards and highlighted recent failures that exposed gaps in regulatory coverage.

The SEC’s Crypto Task Force, led by Commissioner Hester Peirce, aims to provide clarity on the application of federal securities laws to crypto assets and recommend practical policy changes.

The task force is exploring various regulatory challenges, including the security status of crypto assets, public offerings, and custody solutions.

As calls for federal regulation grow, the SEC is poised to play a pivotal role in shaping the future of crypto trading.

The proposed reforms could significantly impact how crypto platforms operate, potentially leading to a more streamlined and secure environment for investors.

However, balancing regulatory oversight with innovation remains a key challenge for policymakers.