The World Federation of Exchanges (WFE), the global industry association for exchange groups and clearing houses, has asked the Securities and Exchanges Commission (SEC) to ensure that crypto firms don’t use the regulator’s broad exemptive relief to circumvent statutory obligations.

While the WFE is supportive of the principle of exemptive relief, we are concerned that the broad use of such relief presents great risks to investors, market integrity, and competition, all of which have negative consequences for US markets.

Exemptive relief from a specific rule or requirement is appropriate where relief is reasonably necessary for a firm to provide a product or service on a level playing field, and where exemptive relief is found to be consistent with the interests of the public and the protection of investors.

If the Commission decides to offer exemptive relief, four standards must be considered:

1. Relief should be in line with four key principles: investor protection, market integrity, fair competition and consistency with international standards.

2. Exemptive orders should be narrow even while we support the Commission’s authority to grant relief where it is appropriate and justified.

3. The Commission should consider time-limiting exemptive relief or, alternatively, introduce stage gates for the deployment and scaling of new products and services, allowing the SEC to assess risks, gather data, and make adjustments before establishing a more permanent framework.

4. Any exemptive relief should be conditional. Among other measures, the Commission could consider the following conditions:

• Recipients remain subject to SEC oversight
• Robust AML requirements are applied
• Clear governance structures are established
• Safeguards, such as asset segregation, are maintained
• A demonstrable commitment to operating fair and orderly markets is upheld.

Nandini Sukumar, CEO of the WFE, said, “Tokenisation is a natural evolution in capital markets. We support innovation where it is pursued responsibly so that neither investors nor market integrity are put at risk. The SEC should avoid granting exemptions to firms attempting to bypass regulatory principles that have safeguarded markets for decades.”

Read the full Letter here.

Source: WFE