ICBA expressed support for a Securities and Exchange Commission proposal confirming that crypto exchanges must follow the same rules of the road as other entities that trade securities.

Definition Update: In a comment letter to the SEC, ICBA said it strongly supports the agency’s proposal to include various crypto trading platforms under its definition of “exchange.” The proposal would include in the definition trading systems that trade crypto asset securities and that use distributed ledger or blockchain technology, including systems characterized as being decentralized.

‘Tech Neutral’ Approach: ICBA said in its letter that crypto exchanges should not get a free regulatory pass simply because they use novel technology to facilitate their peer-to-peer trades. ICBA applauded the SEC’s “technology neutral” approach, which focuses on trading activity over underlying technology, and said cryptocurrencies share many of the same features and use cases as traditional financial products.

Background: When the SEC reopened the comment period on its proposal in April, the agency reiterated the applicability of existing rules to crypto platforms. In a statement, SEC Chair Gary Gensler said the proposal would account for the evolving nature and electronification of trading platforms, though many crypto trading platforms already meet the current “exchange” definition and thus have a duty to comply with the securities laws.

ICBA Advocacy: ICBA has repeatedly called on policymakers to ensure new policies directed at the crypto sector fully reflect its risks and to prioritize research on the specific effects of digital assets on community banks and their customers.