SEC questions whether traditional exchange rules fit crypto assets
The core of the consultation centers on whether existing exchange regulations are suitable for the realities of crypto markets. In particular, Commissioner Peirce questioned whether the rules governing alternative trading systems adopted back in 1998, as well as the National Market System (NMS) framework, are appropriate for blockchain-based trading.
The discussion focuses on crypto assets that qualify as securities, as well as trading pairs that include both security tokens and non-security tokens. According to Peirce, the SEC’s goal is to ensure that regulated platforms can support compliant crypto trading without imposing excessive regulatory burdens.
The Division of Trading and Markets has published an FAQ addressing trading and settlement issues related to mixed crypto pairs. The document explains how national securities exchanges and alternative trading systems can facilitate such trading.
At the same time, the new guidance has highlighted several structural challenges that existing rules do not fully address. Crypto trading often involves non-dollar-denominated assets, on-chain settlement, and continuous markets. As a result, the SEC is reassessing how traditional equity market rules apply to crypto-native trading models.
Peirce emphasized that market participants need greater legal certainty around trading and clearing arrangements. She also stressed the importance of dialogue between regulators and the industry, continuing the approach previously outlined by the SEC’s crypto task force, which focuses on market structure rather than purely enforcement-driven actions.
Focus on ATS, disclosure, and market transparency
The consultation places particular emphasis on alternative trading systems that handle crypto assets. The SEC asked whether a dedicated Form ATS should be introduced specifically for crypto-focused ATS platforms. Currently, Form ATS filings are non-public and do not require Commission approval.
The regulator also questioned whether disclosures related to crypto ATS platforms should remain confidential. The SEC is considering whether public disclosures or prior Commission review could enhance investor protection. It also requested feedback on conflict-of-interest disclosures and whether existing market practices provide sufficient transparency.
Another key issue concerns quarterly reporting via Form ATS-R. The SEC asked whether blockchain transparency reduces the need for confidential reporting, given that on-chain data can already provide regulators with detailed transaction information.
In addition, the Commission sought feedback on recordkeeping requirements under Regulation ATS. The SEC is interested in understanding which records remain technically feasible for crypto platforms operating on blockchain infrastructure and how on-chain data can be incorporated into regulatory oversight.
Turning to compliance costs, the SEC expressed concern about potentially disproportionate regulatory burdens. Peirce invited market participants to identify requirements that impose excessive costs on crypto platforms without delivering commensurate benefits to investors.
Trading pairs, risk management, and system compliance
The consultation also addresses technical and operational risks associated with crypto trading. In particular, the SEC asked how platforms should convert non-dollar-denominated assets into U.S. dollars for compliance purposes and whether specific conversion methodologies should be prescribed under Regulation ATS.
Risk controls under Rule 15c3-5 also received attention. The Commission questioned whether these controls duplicate other regulatory requirements applicable to crypto ATS platforms and whether amendments could improve efficiency without reducing safeguards.
The SEC further examined the applicability of Regulation SCI, which governs systems compliance and integrity. Peirce questioned whether the costs of complying with Regulation SCI are justified by the benefits for crypto trading platforms and whether these requirements are suitable for blockchain-based systems.
The consultation also extends beyond institutional platforms. The SEC highlighted the need to protect individual software developers and automated trading tools, ensuring that regulation does not create barriers for decentralized or autonomous trading solutions.
The statement notes that the feedback received will inform the future work of the SEC’s crypto task force. The Commission also invited broader input on improving the regulation of national securities exchanges and alternative trading systems, taking into account the specific characteristics of the crypto industry.
Overall, the consultation marks a systematic reassessment of crypto trading oversight. The SEC is evaluating whether it is time to shift from an enforcement-focused approach toward updated market rules. Exchanges, investors, and technology firms are now invited to submit detailed proposals as part of the public comment process.