Kim Kyung Hoon/Reuters
- Brett Redfearn, the new director of the Division of Trading and Markets at the SEC, says cryptocurrency exchanges are acting amateurish.
- Not a single exchange appears to be anywhere close to being properly registered with the SEC, Redfearn said during the DTCC Fintech Symposium in New York on Thursday.
When Brett Redfearn joined the Securities and Exchange Commission six months ago, he had no idea how much time he was going to have to spend thinking about bitcoin, the JPMorgan alumnus told a crowd at a fintech conference in New York City.
Yet, think about bitcoin he must.
The market for digital coins has exploded in recent years, with more than 1,500 digital currencies trading across more than 9,000 markets, according to the most recent data from CoinMarketCap. Some are saying the market is in full-fledged mania mode.
As the new director of the Division of Trading and Markets for the SEC, Redfearn has been grappling with a big question: What to do about the profusion of cryptocurrency exchanges and ICO trading platforms currently serving US investors?
In early March, Redfearn's unit made the answer to that question clearer. If an exchange has digital assets trading on its platform that meet the definition of a security, then that trading venue needs to register as an exchange.
"If a platform offers trading of digital assets that are securities and operates as an "exchange," as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange, or be exempt from registrations," the SEC said in a statement.
It's been a little less than two weeks since the release of that memo, and still not a single digital asset exchange or trading system appears to be close to being registered, Redfearn noted.
He said certain crypto-exchanges come into to the SEC's offices and regulators ask questions such as, "Did you get your broker-dealer registration in with FINRA?" and the answer is always "No we haven't started that, no we haven't started that, we haven't started that."
The degree to which digital asset exchanges and trading platforms are dragging their feet when it comes to conforming to the necessary regulations is concerning to Redfearn.
"You want to come in and talk about doing things the right way," he said. "Well, you know, come in and tell us how we can help you."
"And let's make this much more of a real conversation as opposed to a ... statement of intent," he added.
"We need to move from the theoretical to the practical."
Even more concerning is the state of the cryptocurrency space's market structure. Here's Redfearn:
"How do we know that there is a fair price, what is the bid, what is the ask, do people know where the market is, what is the concept of best execution in these markets? We haven't really spoken about these things."