The US Securities and Exchange Commission (SEC) now requires that platforms trading digital assets which meet the definition of a security must register with the agency as an exchange,  according to a public statement issued by the regulatory body on Wednesday, March 7.

Cryptocurrency exchanges would subsequently be governed by the same rules as traditional exchanges. For this reason, they must register with the SEC “as a national securities exchange or be exempt from registration”.

In the statement, the SEC warns that many online trading platforms referring to themselves as exchanges are currently unregulated, though they can give the impression that they are compliant with the regulatory standards.

“The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not,” said the SEC.

The statement added that some of these unlawful trading platforms establish their own rules and standards when picking digital assets that are not approved or endorsed by the SEC.

The SEC added that entities aiming to operate as an alternative trading system (ATS) are also subject to regulatory requirements. Exchanges of this kind should register with the SEC as a broker-dealer and become a member of a self-regulatory organization (SRO).

“Registration as a broker-dealer subjects the ATS to a host of regulatory requirements, such as the requirement to have reasonable policies and procedures to prevent the misuse of material non-public information, books and records requirements, and financial responsibility rules, including, as applicable, requirements concerning the safeguarding and custody of customer funds and securities,”  the SEC wrote.

According to the statement, the SEC is undertaking these regulatory measures “to protect investors and prevent against fraudulent and manipulative trading practices.” The agency is also open to assisting trading platforms implementing new technologies to comply with federal securities laws.

In February 2018, at a SEC and Commodities and Futures Trading Commission (CFTC) joint senate hearing, SEC chairman Jay Clayton promised smart and practical regulations for exchanges and investors dealing with Bitcoin and Ethereum, while Initial Coin Offerings (ICO) would be met with tighter regulations.