The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have entered into a Memorandum of Understanding (MoU) as the regulators seek to enhance coordination and collaboration between the entities.
Innovation is at the fore of the decision, according to the watchdogs, with a focus on fostering development with “the minimum effective dose of regulation to enhance US competitiveness in finance”.
In conjunction with the MoU, the agencies have also created a new initiative – the Joint Harmonisation Initiative – aimed at promoting regulatory clarity in areas of common regulatory interest.
Specifically, the aims include providing a fit-for-purpose regulatory framework for crypto, reducing frictions for dually registered trading venues, modernising clearing, and streamlining trade data reporting.
In an official announcement, Paul Atkins, chair of the SEC, highlighted that the move is set to end decades of “regulatory turf wars, duplicative agency registrations, and different sets of regulations between the SEC and CFTC” which have effectively “stifled innovation and pushed market participants to other jurisdictions”.
He added: “This updated Memorandum of Understanding will serve as a roadmap for a new era of harmonisation between the agencies […] By aligning regulatory definitions, coordinating oversight, and facilitating seamless, secure data sharing between agencies, we will ensure our rules and regulations deliver the clarity market participants deserve.”
Michael Selig, CFTC chair, echoed this sentiment, iterating that the US financial markets are the envy of the world, adding: “By working together, we’ll eliminate duplicative, burdensome rules and close gaps in regulation for the benefit of all Americans and usher in a ‘golden age’ of American finance.”
For many across the industry this MoU has indeed been a long time coming, with participants having battled decades of time-consuming, and often duplicative, requirements from both regulators.
Read more: Unpacking the 20 most impactful financial regulations from the last 20 years
Speaking to The TRADE, global asset management regulation expert, Sean Tuffy, shared that the move is undoubtedly linked to crypto.
“Historically the CFTC and SEC have been, more or less, diametrically opposed to how the crypto sector should be regulated, which has bogged down any attempted rulemaking. This should help remove any ambiguity and lead to a more cohesive and favourable regulatory approach to the crypto sector. Whether that’s a good or bad thing really comes down to your view on crypto.”
“[…] while it’s easy to be cynical about things these days, I think any attempt to better harmonise the work of the CFTC and SEC and reduce the regulatory friction between the two should be welcomed by the broader industry.”