Rather than designing an entirely new framework, the Avalanche Policy Coalition says that U.S. regulators already have the tools to bring crypto spot markets under supervision by extending existing rules to new instruments.
During a recent interview with TheStreet Roundtable, Lee Schneider, General Counsel at Ava Labs, outlined the coalition’s proposal, which centers on empowering the SEC and CFTC to authorize already regulated intermediaries to trade spot crypto.
“Crypto is different, in a lot of ways, from existing financial instruments, but it’s still an instrument that trades electronically, settles electronically, and fits into a framework that regulators and market participants already understand,” Schneider said.
“Companies have a lot of experience with this,” he said. “Regulated intermediaries have a lot of experience with electronic trading, custody, settlement, surveillance, and risk management. None of that is new just because the underlying asset happens to be crypto.”
The coalition’s proposal unfolds in two stages. The first is exemptive relief. Under that approach, the SEC and CFTC would allow regulated entities to begin trading spot crypto after certifying that they have appropriate safeguards in place.
“You now have exemptive relief,” Schneider said. “If you want to start trading this stuff, you have to file a certification with us telling us that you’re doing it, what policies and procedures you have, and how you’re going to protect customers.”
During this transitional phase, firms would remain subject to examinations by regulators. That period would allow those regulators to observe how crypto trading functions within existing market infrastructure before formal rules are finalized.
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