The U.S. Securities and Exchange Commission Provides Clarity for Cryptocurrency User Interfaces

The U.S. Securities and Exchange Commission, through the Trading and Markets division, issued guidance to platforms that create, offer, and operate specific user interfaces that enable users to set up securities transactions for digital assets. The agency defined these user interfaces as a website, a browser extension, or another software application that may be embedded in a digital wallet or available for download separately.

These digital interfaces make it easier for users to initiate securities transactions for digital assets on blockchain networks or through blockchain-based smart contracts using their self-custody electronic wallets. The SEC also noted that this guidance may apply to cryptocurrency exchanges or data aggregation platforms that provide users with market data, such as potential execution paths, asset prices, and estimated transaction costs, for digital securities transactions.

Furthermore, these included user interfaces may provide educational materials to help users identify the best standards for the transaction. The agency referenced Section 15(A) of the Securities Exchange Act, which requires brokers executing securities transactions to register under Section 15(B) of the same law.

Although these digital interfaces may be classified as brokers, the SEC has outlined conditions under which they do not object to operating without registration as registered brokers. This includes cases where the included user interface allows users to customize criteria for virtual digital asset security transactions and provides educational materials to help them set their preferred standards.

Additionally, the SEC will not object to these service providers operating without registration as financial brokers, provided they do not solicit investors to participate in specific securities transactions. Broker service providers that choose to operate on one or more virtual trading platforms may also be exempt. The agency staff emphasized that the focus is on platforms that maintain neutrality and offer users a wide range of options to execute their securities transactions.