US SEC Charges Cumberland DRW for Unregistered Crypto Trading

The U.S. Securities and Exchange Commission (SEC) has charged Cumberland DRW, a prominent crypto market maker, for operating as an unregistered dealer in the cryptocurrency market. The SEC claims that Cumberland has engaged in transactions involving over $2 billion in crypto assets since March 2018, which the agency classifies as securities.

Key Takeaways

• Cumberland DRW charged with acting as an unregistered dealer.
• Allegations involve over $2 billion in crypto asset transactions.
• SEC asserts that all dealers must register, including those in crypto.
• Cumberland disputes the charges, citing regulatory ambiguities.

Background of the Charges

The SEC's action against Cumberland DRW highlights ongoing tensions between cryptocurrency firms and regulatory bodies. According to the SEC, Cumberland has been buying and selling crypto assets deemed securities and trading them as investment contracts on various third-party exchanges. This practice, the SEC argues, violates federal securities laws that mandate registration for all dealers.

Regulatory Framework

The SEC's stance is clear: all dealers in securities, including those operating in the crypto space, must register with the Commission. Jorge G. Tenreiro, the acting chief of the SEC's crypto assets and cyber unit, emphasized that the laws apply equally to traditional securities and crypto assets.

Cumberland's Response

In response to the charges, a spokesperson for Cumberland expressed frustration and disappointment. The spokesperson stated that the firm has been unable to comply with the SEC's registration requirements due to a lack of clear regulatory frameworks. They pointed out that the SEC Chairman Gary Gensler has encouraged firms to register, yet Cumberland has faced restrictions on using its dormant registered broker-dealer for crypto activities.

Broader Implications for the Crypto Industry

The SEC's actions against Cumberland DRW are part of a larger pattern of regulatory scrutiny facing the cryptocurrency industry. The agency has been involved in legal disputes with several major crypto platforms, including Coinbase, Binance, and Kraken. These companies argue that many crypto assets do not fit the traditional definition of securities, challenging the SEC's authority in this domain.

Conclusion

The charges against Cumberland DRW underscore the complexities and challenges of navigating the regulatory landscape in the rapidly evolving cryptocurrency market. As the SEC continues to assert its jurisdiction over crypto assets, firms in the industry must grapple with the implications of these regulations and the potential for further legal battles ahead.

Sources

• US SEC charges Cumberland DRW for acting as unregistered dealer in crypto markets, Yahoo Finance Canada.