Two key U.S. financial regulators agreed to coordinate their actions in overseeing securities, digital asset, and derivatives markets, whose boundaries are becoming increasingly blurred.
The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) signed a Memorandum of Understanding (MoU) aimed at harmonizing regulation in areas of overlapping jurisdiction, including crypto-assets, derivatives, and trading infrastructure.
At the core of the agreement is the elimination of duplicative regulation, the reduction of administrative barriers for market participants, and the development of coordinated approaches to new financial instruments, including crypto-assets and super apps.
In particular, the parties agreed to work jointly in six key areas, including:
- Clarifying definitions of financial products through joint guidance and rulemaking.
- Modernizing requirements for clearing, margin, and collateral.
- Reducing regulatory barriers for platforms and intermediaries with dual registration.
- Developing a specialized regulatory model for crypto-assets and emerging technologies.
- Optimizing reporting on trading data and funds.
- Coordinating inspections, risk analysis, supervision, and enforcement.
In the area of enforcement, the parties specifically agreed to:
- identify cases with overlapping jurisdiction at an early stage;
- coordinate charges and liability measures;
- coordinate the filing of parallel lawsuits and public statements;
- avoid duplicative sanctions and conflicting requirements.
The parties also agreed to avoid the practice of “regulation through enforcement,” which the SEC had previously applied to the cryptocurrency sector, and to ensure that market participants receive advance notice of regulatory requirements.
Particular attention will be given to companies with dual status; for example, those registered simultaneously as swap dealers and security-based swap dealers, or as trading venues for both types of instruments. For such entities, the regulators plan to coordinate inspection plans, exchange inspection results, and minimize duplicative procedures.
The regulators also confirmed their intention to coordinate decisions regarding the approval for trading of new derivatives and crypto-assets. Situations requiring consultation include:
- the listing of new derivatives and crypto products;
- mergers and changes in ownership structure of regulated organizations;
- significant supervisory decisions and planned regulatory acts;
- investigations and sanctions that could affect markets under joint jurisdiction.
Besides, the SEC and CFTC plan to develop compatible data standards and analytical tools to detect market abuse and operational risks. The agreement includes regular joint assessments of emerging threats across different market segments, as well as expanded data sharing in compliance with federal cybersecurity standards, including encryption of information both in storage and during transmission.
The agreement doesn’t create legally binding rules and doesn’t limit the authority of either commission under existing law. At the same time, the parties established strict safeguards for non-public information, including the obligation to notify each other of requests from Congress or the courts.
The MoU took effect upon signing and will remain in force indefinitely unless one of the parties initiates its revision or termination with 30 days’ notice.
About a month ago, representatives of the SEC and CFTC announced plans to independently develop a regulatory framework for the crypto industry, as the relevant bill faced delays in Congress.
