Michaela
The U.S. Securities and Exchange Commission (SEC) has granted an exemption allowing certain personally identifiable information (PII) of individual traders to be excluded from reporting requirements under the Consolidated Audit Trail (CAT).
In a press release issued February 10, the SEC clarified that the exempted PII includes individuals’ names, residential addresses, and birth years.
The commission explained that this decision stems from growing concerns over increasingly sophisticated bad actors in the crypto space. In the event of a data breach, such individuals could exploit personal information to impersonate customers or broker-dealers, potentially gaining unauthorized access to accounts.
By exempting certain personally identifiable information from reporting requirements, the SEC aims to reduce security risks and protect investors.
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“Over 12 years ago, the CAT was designed with the goal of creating a modernized audit trail system to enable regulators to analyze and reconstruct market events,” said acting SEC Chairman Mark Uyeda.
“Despite today’s action, bad actors and other miscreants who engage in insider trading, market manipulation, and other schemes should be forewarned that the Commission has more than sufficient investigative tools to hold them accountable,” acting Chair Uyeda added.
The CAT was initially designed to collect names, addresses, and years of birth to generate unique anonymized customer IDs. This information was intended to assist regulators in accurately identifying individuals responsible for trades and ensuring greater transparency in market activities.
The SEC’s decision to exempt certain PII from the CAT is intended to enhance security measures, but it also raises concerns about potential regulatory challenges. Without key identifying details, regulators may find it more difficult to track and analyze suspicious trading activity, potentially weakening market oversight.
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Additionally, the exemption could create gaps that sophisticated traders or entities might exploit to evade scrutiny, posing a risk to market integrity. The removal of certain PII from the CAT may reduce its effectiveness in maintaining accountability and enforcing regulatory compliance, raising concerns about potential gaps in market oversight.
The crypto community has shown a mixed response to the SEC’s decision. Following Commissioner Hester Peirce’s announcement of the exemption, reactions varied, with some industry participants welcoming the move while others expressed concerns over its potential impact.
An X user identified as Penny Squeezer criticized the SEC’s decision, arguing that the exemption shields Wall Street criminals rather than addressing the underlying issues.
Eric Forgy, founder of the decentralized liquidity protocol CavalRe, weighed in on the SEC’s exemption, calling it a “good start.” He also emphasized the need to eliminate the Know Your Customer (KYC) regulatory process.
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MICHAELA
Michaela is a news writer focused on cryptocurrency and blockchain topics. She prioritizes rigorous research and accuracy to uncover interesting angles and ensure engaging reporting. A lifelong book lover, she applies her passion for reading to deeply explore the constantly evolving crypto world.
