OTC Markets approved by US financial regulators, preparing to provide services for securities-based digital assets.

The over-the-counter (OTC) trading service company OTC Markets, stock code: OTCM, revealed in a financial report conference call that it has obtained approval from the U.S. Financial Industry Regulatory Authority (FINRA) on May 5th to provide services for securities-related digital assets. R. Cromwell Coulson, President and CEO of OTC Markets, stated:

We have recently received approval from FINRA to allow broker-dealers to trade digital asset securities on OTC Link ATS. This approval further advances our mission to operate regulated markets for broker-dealers and securities issuers. While the development of regulatory frameworks and infrastructure will take some time, we believe our market is ready to become part of the new trading, data, and disclosure solutions for these securities.

OTC Markets Provides Over-the-Counter Trading Services

OTC Markets is a U.S.-based company that offers over-the-counter trading services. Companies trading on OTC Markets do not need to submit financial reports to the SEC, but they are required to disclose relevant financial information, albeit under more relaxed conditions. These companies are typically smaller banks and international corporations. The Grayscale Bitcoin Trust and Grayscale Ethereum Trust funds issued by Grayscale are traded through OTC Markets.

If Digital Assets Are Classified as Securities?

OTC Markets legal counsel Cass Sanford stated in a subsequent statement that proper disclosure is the foundation for protecting investors, indicating that OTC Markets is prepared to join and provide a market for digital securities. The U.S. Securities and Exchange Commission (SEC) has long maintained that all digital assets or cryptocurrencies are securities. If this holds true, OTC Markets will eventually provide liquidity for these assets.

Sanford mentioned that if digital assets are classified as securities, they would be considered stock securities for over-the-counter trading under Rule 15c2-11 for non-reporting companies. Coinbase is also beginning to understand this perspective. In a 2022 rulemaking petition, they inquired about how Rule 15c2-11 would apply to facilitate broker-dealers in digital asset securities trading.

Despite slow progress from regulators in providing clear regulations and advancing comprehensive legislation and oversight, causing investors and the industry to operate in an uncertain environment, proper disclosure can provide the transparency, assurance, and protection needed to rebuild industry trust for investors and regulatory bodies. OTC Markets believes the market is ready for this.