Nasdaq, the operator of one of the premier U.S. stock exchanges and a crypto index, is advising the U.S. regulators to carefully focus on defining digital assets in four buckets that will clearly determine which agency acts as referee, according to a 23-page letter sent to the Securities and Exchange Commission’s crypto task force.
“While a stock by any other word would still be a stock, the existing market ecosystem can readily absorb digital assets by establishing the proper taxonomy and calibrating certain rules to reflect what is truly new and novel about digital assets,” the letter argued in response to the invitation issued by the task force’s chief, Commissioner Hester Peirce, to weigh in on future regulations.
The four future categories of digital assets, in Nasdaq’s view, should be:
financial securities (tokens tied to assets that are securities under existing definitions, like stocks, bonds and exchange-traded funds (ETFS), which Nasdaq said should be treated just the same as their underlying assets);
digital asset investment contracts (tokenized contracts that check all the securities boxes under a “clarified version” of the Supreme Court’s so-called Howey test);
digital asset commodities (meeting the U.S. definition of commodities)
other digital assets (stuff that doesn’t fall anywhere else and shouldn’t have rules for securities or commodities imposed on it)
The securities categories belong in the hands of the SEC, which will be working with its cousin agency, the Commodity Futures Trading Commission, that will handle the commodities. Those agencies — presumably directed at some point by a new crypto law hatched by Congress — will figure out the precise border between their jurisdictions.
The letter, signed by John Zecca, the company’s chief regulator executive, argued that “digital assets that constitute financial securities must trade as they do today.”
Nasdaq also suggested that the two agencies should formulate a kind of crossover trading designation for platforms that can handle digital asset investment contracts, commodities and other types of assets under one roof.
In the letter, Nasdaq underlined its digital-asset credibility, saying its “trading and clearing services, market and trading surveillance, and central securities depository technology support digital assets platforms on six continents.” It contended that the regulators should consider imposing safety measures or further constraints on firms that want to handle investors’ activity from top to bottom, which is the common approach of existing crypto firms.
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