Wintermute meets with SEC Crypto Task Force, says many companies stay away from US

Wintermute had the U.S. Security and Exchange Commission’s (SEC’s) undivided attention for a short period on March 28. Representatives of the London-based algorithmic market maker requested a meeting with the SEC Crypto Task Force on March 12, and got it on March 28.

The request came through a letter from Morrison Cohen LLP’s crypto partner Jason Gottlieb to the task force chair Hester Peirce. The SEC did not specify who was in attendance from Wintermute’s side, but the request said that co-founders Evgeny Gaevoy and Marina Gurevich would be available in Washington on the day the meeting was held.

The letter had a clearcut agenda

England-based Wintermute’s letter referenced Peirce’s request for information (RFI) titled “There Must Be Some Way Out of Here” with irony, saying that many non-U.S. companies are looking for a way in. Wintermute observed:

“To date, Wintermute has avoided opening an office in the United States, primarily out of fear of the previous administration’s arbitrary and capricious enforcement regime, but also because the rules and regulations for liquidity provision in the United States were incredibly unclear, leaving good actors outside the U.S. reticent to enter the U.S. markets.”

Gaevoy disclosed plans in a Bloomberg interview in February for Wintermute would open a U.S. office. The SEC acknowledged that Wintermute’s questions were discussed in the meeting between them, but it did not disclose the results of those discussions.

The letter suggested a ten-point agenda for the meeting that addressed four of Peirce’s questions in her RFI, jurisdictional issues, market-making best practices and “How the Commission can advance these best practices within the scope of its statutory remit.”

The SEC is changing

So, the sides presumably spoke about determining the security status of crypto assets, trading and market structure challenges to providing liquidity to tokenized securities, order execution obligations and monitoring crypto markets using open-source data.

Furthermore, the letter wanted the sides to address why the definition of dealer in the 1934 Exchange Act does not apply to liquidity providers in crypto and whether the SEC has the authority to challenge market manipulation.

The firm watched the SEC suit against Cumberland DRW closely, the letter said. That firm was sued for allegedly selling unregistered securities. The definition of a dealer was one of the points the SEC used in that case. The suit was filed in October and dismissed on March 4. Cumberland claimed that it had been in talks with the SEC for five years when the suit was filed.

Peirce’s RFI/statement “There Must Be Some Way Out of Here” was released on Feb. 25 and posed 48 questions across ten topics. “Greater crypto clarity […] requires the public’s input,” Peirce wrote. The task force itself was announced on Jan. 21 to help the commission with registration, regulation, disclosure and similar issues. 

“To date, the SEC has relied primarily on enforcement actions to regulate crypto retroactively and reactively,” the agency admitted in the announcement of the new task force. Acting chair of the SEC Mark Uyeda has promised to change the SEC’s methods, after the industry claimed for years that it was being treated unfairly and arbitrarily by the agency.

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