Wall Street Journal: U.S. Crypto Exchanges Have Listed Multiple SEC-Deemed Illegal Tokens

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June 25, 2023

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Crypto exchanges based in the US may have listed multiple tokens deemed by the Securities and Exchange Commission (SEC) to be unregistered securities, according to a Wall Street Journal report.

The so-called unregistered securities are, in reality, digital tokens that the SEC does not consider to be commodities under the regulatory framework that currently exists in the US.

According to the Wall Street Journal report, 76 such digital tokens that trade, or have been traded, in the US have so far been identified by the SEC and US courts, with Ripple’s XRP token being the best-known and most valuable.

As a result of the classification, all 76 of these tokens are considered to have been distributed and sold illegally to the public, in direct violation of US investor-protection laws.

According to the Wall Street Journal, there are now 16 tokens deemed to be securities that still trade on one or more major US-registered crypto exchanges, after several tokens were delisted from the same exchanges following SEC actions.

Among the tokens that have been delisted is XRP, which in 2021 was made unavailable to users by the major US exchanges Coinbase and Kraken.

Out of the 76 security tokens that at some point have been traded in the US, 37 – or almost half of them – have been involved in the alleged fraud, the report added.

SEC seeks expanded authority over crypto

While the various regulatory agencies in the US generally agree on to take a tougher stance on crypto, it is clear that the SEC’s classification of many of these tokens could be part of an effort on the SEC’s end to seek greater influence and expand its oversight of crypto.

Under current rules, the SEC only has the authority to regulate securities.

Assets that are classified as commodities – with Bitcoin being one of them – are not regulated by the SEC but instead by the Commodity Futures Trading Commission (CFTC).

Regulators in the US have been particularly active in cracking down on the crypto industry this year, leading some in the industry to refer to it as “Operation Choke Point 2.0.”

Among the most notable developments in the ongoing crackdown have been the Wells notice that Coinbase was served by the SEC, and a lawsuit against Binance and its CEO Changpeng Zhao by the CFTC.