Washington, D.C.— A new report from the Center for American Progress recommends steps the U.S. Securities and Exchange Commission (SEC) can take to use its existing authorities to make digital asset trading more energy efficient, protect investors, and prevent money laundering, tax evasion, and criminal activity.
The report argues that many digital assets, such as some cryptocurrencies, meet the criteria to be considered a security, allowing the SEC to exercise its authority over how those assets are issued, how they are bought and sold, and their associated market infrastructure. For digital assets that meet one of two legal tests, the SEC has wide latitude to address the energy consumption, market manipulation, deception, and out-and-out theft occurring over these assets, as well as their use in money laundering, tax evasion, and criminal activities.
The report lists the following steps that the SEC can take to protect market participants and the broader economy, as well as to reduce digital assets’ environmental footprint:
- Use its authority to disclose blockchains’ environmental impact or impose regulations that work to mitigate those impacts.
- Require that digital asset exchanges use trust companies, which would eliminate energy-intensive blockchain hashing.
- Require that U.S.-based brokers trading digital assets, or those assisting U.S. clients, comply with existing anti-money laundering and tax reporting laws for securities.
- Enforce investor protections already in law.
“Without oversight and the transparency of cryptocurrency markets, investors are being significantly harmed, and many are losing their life savings,” said Todd Phillips, author of the report and director of financial regulation and corporate governance at CAP. “Fortunately, regulators already have the legal authority to address many of the risks that digital assets pose to investors, the environment, and the economy at large. The SEC and all financial regulators should move quickly to use their existing authority to ensure that the digital assets markets are in line with the agency’s larger environmental, social, and governance goals.”
Read the report: “The SEC’s Regulatory Role in the Digital Asset Markets” by Todd Phillips
For more information or to speak to an expert, contact Julia Cusick at [email protected].