a16z Recommends US SEC Regulate Cryptocurrency Trading Platforms Using the ATS Framework

On September 14, a16z submitted a comment letter to the U.S. Securities and Exchange Commission (SEC), proposing that a more flexible, market-adaptable regulatory framework for crypto trading platforms (CTPs) be established by drawing on the existing Alternative Trading System (ATS) regulatory framework. a16z argues that the U.S. crypto market remains in its early stages with high retail participation, so the regulatory framework should clarify regulatory boundaries while leaving room for market deepening and innovation. The firm recommends that crypto trading platforms register with the SEC via a notice-based registration process, and allow platforms to trade both non-securities asset pairs (such as bitcoin and stablecoins) and securities-non-securities asset pairs simultaneously to prevent further fragmentation of the crypto market. Additionally, for CTPs trading NMS (National Market System) stocks like tokenized equities, Form ATS-N public disclosure requirements should only apply once they meet the trading volume thresholds set under existing Regulation ATS; information below the threshold should be kept confidential from both the SEC and platform users. a16z also suggests that crypto trading platforms should be subject to record-keeping requirements similar to those for ATS, and allow relevant records to be stored on the blockchain under specific conditions. It further proposes that platforms be permitted to set differentiated access permissions, rights, and obligations for different user groups. The firm states that the SEC should leverage the flexibility and innovative nature of ATS to set clear regulatory parameters for crypto trading platforms, while allowing operators to innovate and experiment within this framework.