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More regulation coming: SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps

Market Insider | Camomile Shumba | Jul 22, 2021

gary gensler  - More regulation coming:  SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swapsThe US Securities and Exchange Commission's chair, Gary Gensler has indicated stablecoins and other security-backed tokens will not be exempt from the regulator's upcoming rule changes.

Gensler told the American Bar Association Derivatives and Futures Law Committee's virtual mid-year program on Wednesday that stablecoin issuers would need to register with the regulator and ensure certain levels of transparency in how they transact.

"Make no mistake: It doesn't matter whether it's a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities," Gensler said. "These platforms - whether in the decentralized or centralized finance space - are implicated by the securities laws and must work within our securities regime," he said.

Stablecoins, which are crypto coins pegged to an asset such as the dollar, such as Tether, have come under greater scrutiny from regulators given their potential for destabilizing payments systems.

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Transparency is a big topic in the crypto-space as digital tokens are popular, in part because of their decentralized nature, and the relative anonymity they afford their users.

But the US regulator has started to clamp down on some aspects of the crypto market to prevent the use of these coins in illicit activities, such as money laundering. The SEC also sued Ripple Labs late last year over sales of its network's XRP token, which the regulator said should be treated as a security and not a currency.

Gensler said greater transparency would mean that, even for over-the-counter swaps deals, the public would be able to see both the price and the volume at which these transactions took place.

He said that for a company to register a stablecoin, it would have to have solid back-office controls and adequate cushions against losses, through both its own capital reserves and customer margin.

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On top of that, the Genlser said the SEC will require companies to have a host of new counterparty requirements for capital and margin, including internal risk management systems, supervision and chief compliance officers, trade acknowledgement and confirmation, record-keeping and reporting procedures.'

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NCFA Jan 2018 resize - More regulation coming:  SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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