The SEC’s Division of Trading & Markets today issued a conditional no-action position that it would not object if compliant “user interfaces” designed to facilitate the execution of crypto securities transactions operate without registering as broker-dealers. In plain English, the staff’s position applies to interfaces operating in a neutral fashion by providing mechanics to facilitate transactions on one or more trading platforms. The staff defines “user interface” as “an interface provided by a website, browser extension, or other software application (e.g., mobile application) that may be embedded in a wallet or separately available for download, designed to assist users engaging in user-initiated crypto asset securities transactions on blockchain protocols (or blockchain-based smart contracts) utilizing the user’s self-custodial wallet.”
The staff’s statement includes several conditions, including that the user interface does not negotiate terms, take or route orders, execute transactions, solicit specific securities transactions or process trade documentation. The conditions include compliance mechanisms, among other things, to evaluate and audit trading venues, and disclosures including those related to potential conflicts of interest. The conditions do not expressly prohibit relationships with affiliated trading platforms. The Division’s statement is available here: SEC.gov | Staff Statement Regarding Broker-Dealer Registration of Certain User Interfaces Utilized to Prepare Transactions in Crypto Asset Securities
The Division described this relief as “interim” pending the adoption of formal rules related to crypto transactions. As previously reported, it appears that the adoption of new legislation, along with SEC and CFTC rules, is on the horizon.
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