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An official at the American financial regulatory body Securities and Exchange Commission (SEC), Brett Redfearn, has mentioned that the cryptocurrency marketplace needs improvement regarding greater regulation and surveillance. He raised various concerns at a conference organized by the Depository Trust and Clearing Corporation (DTCC), the chief among them being the alarming lack of registered exchanges or Alternative Trading Systems (ATS) that are engaged in cryptocurrency trading.

What is an ATS?

Alternative Trading System (ATS), as the name suggests, is a trading system developed in the US & Canada that brings buyers and sellers together to exchange securities at a public exchange. In simpler terms, Alternative Trading Systems are a substitute for the stock exchange.

However, they function more as broker-dealers rather than as full-fledged national exchanges and are essential for being an alternative way for investors to access liquidity.

Why is ATS registration necessary?

Talking about unregistered cryptocurrency trading, the SEC has further emphasized that it does not want to stifle an innovative technology like the cryptocurrencies. However, as a regulatory body, it has a responsibility to protect investors against market anomalies, like fraud, compromised cybersecurity, money laundering, and terrorist funding among others.

It is in this respect that FINRA (Financial Industry Regulatory Authority) has propagated an alert for unregistered ATSs and other exchange platforms about an audit of licenses regarding exchange activities. In response, the companies are scrambling to get a license in time to be able to operate as legal exchanges in the US. The SEC brought first charges on TokenLot, an “ICO superstore” because it deemed TokenLot to be acting as an unregistered broker-dealer.


FINRA’s reminder can be seen both as an order as well as a warning. Cryptocurrency trading has been unregulated, and it might be possible that this warning has come in the wake of underlying fraud. With this ultimatum, FINRA might as well be hinting at an impending audit. The possibilities are many, but for now, we can only speculate.

FINRA Regulation – a boon or a bane?

On the surface, greater surveillance means greater investors protection and platform credibility, and such measures are likely to pay off well in the end for both investors and firms. However, let us not forget that complying with the rules & regulations forced by the authorities often becomes a blockage in the path of innovation. It does not just prevent a creation from happening but also restrains a brain from envisaging. After all, innovations tend to occur in open spaces and not within bounded ambiances. It remains to be seen how regulatory authorities create this balance.