SEC Proposes Narrowing Trading Rule, Easing Crypto Asset Restrictions
The US Securities and Exchange Commission (SEC) has proposed narrowing a long-standing trading rule, potentially easing restrictions on crypto assets. The amendment to Rule 15c2-11 would limit its scope to equity securities only, reversing a broader interpretation introduced in 2021. A 60-day public comment period is now open for feedback on the changes.
Rule 15c2-11 was first introduced in 1971 to ensure broker-dealers kept accurate issuer information when quoting over-the-counter (OTC) securities. Its original aim was to reduce risks in thinly traded markets, particularly penny stocks. But in 2021, the SEC expanded its interpretation, raising questions about whether crypto assets—if classified as securities—would also fall under the rule.
Over the past five years, the SEC has increasingly applied OTC trading regulations to cryptocurrencies. By classifying many digital assets as securities under the Howey Test, it required OTC trading platforms like Cumberland and Genesis to register as broker-dealers or alternative trading systems (ATSs). This created stricter compliance burdens for crypto firms compared to traditional equity OTC markets, which operate under long-standing exemptions.
The proposed amendment seeks to clarify the rule's scope by excluding non-equity securities. Commissioner Hester Peirce, who leads the SEC's crypto task force, has backed the change, arguing it would resolve confusion caused by the 2021 expansion. However, the SEC has not yet decided whether 'equity securities' could eventually include certain crypto assets.
The SEC's proposal opens a 60-day window for public input on how the rule should apply and whether crypto assets remain outside its scope. If adopted, the change could make it easier for broker-dealers to support crypto trading. The final decision will determine how digital assets are treated under OTC market regulations.
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