Key Takeaways
- The SEC has proposed limiting OTC Rule 15c2-11 to equities, removing a major compliance burden for crypto firms.
- The change could simplify how broker-dealers quote digital assets in OTC markets.
- It reflects a broader shift toward more tailored crypto regulation under current SEC leadership.
For years, a rule designed to police penny stocks has quietly shaped how crypto trades in the United States.
Now, that may be changing.
On March 16, the U.S. Securities and Exchange Commission (SEC) proposed amendments to Exchange Act Rule 15c2-11, a decades-old regulation governing how broker-dealers publish quotes in over-the-counter (OTC) markets.
The update could significantly alter how digital assets are traded outside traditional exchanges by removing a layer of regulatory ambiguity that has long weighed on the sector.
At the center of the proposal is a simple clarification: Rule 15c2-11 applies to equities—not crypto.
A Rule Built for Stocks, Not Tokens
Rule 15c2-11 was originally designed to curb fraud in opaque microcap equity markets.
It requires broker-dealers to collect and maintain detailed issuer information—financials, business descriptions, and other disclosures—before quoting securities in OTC markets.
That framework made sense for traditional companies. It has proven far less compatible with crypto.
Digital assets often lack centralized issuers, standardized disclosures, or corporate filings.
Applying equity-style requirements to decentralized tokens created a mismatch that left firms navigating unclear obligations.
SEC Chairman Paul S. Atkins addressed this directly, stating that regulations should be tailored to the asset class they govern.
The proposed amendment, he said, would clarify that Rule 15c2-11 “applies to equity securities.”
Commissioner Hester Peirce echoed that view, noting that while the rule historically referred broadly to “securities,” market practice had long treated it as focused on OTC equities.
Amendments introduced in 2020—implemented in 2021—blurred that distinction, raising questions about whether crypto assets fell within its scope.
The new proposal attempts to resolve that ambiguity.
The Compliance Burden on Crypto Firms
Since the 2021 changes, firms operating OTC crypto desks have faced a difficult choice.
They could attempt to comply with disclosure requirements designed for traditional companies—often impractical for decentralized assets—or limit their activity to avoid potential enforcement risks.
Many opted for caution.
Some reduced quoting activity or widened spreads. Others avoided certain tokens altogether.
In some cases, firms shifted operations offshore, where regulatory expectations were clearer.
This led to fragmented liquidity and higher transaction costs, especially for institutional trades that rely on OTC desks to execute large orders without moving market prices.
The proposed amendment would remove much of that friction by excluding non-equity digital assets from the rule’s scope.
Broker-dealers would no longer be required to gather and maintain issuer-style disclosures before quoting crypto assets in OTC markets.
For market participants, that could mean fewer compliance hurdles and a more straightforward path to operating within U.S. markets.
What Changes in Practice
If adopted, the amendment would allow broker-dealers and market makers to publish quotes for assets such as Bitcoin (BTC) or Ether (ETH)—when treated as non-equity securities—without meeting the same information requirements applied to equities.
That shift could lower operational costs and reduce legal uncertainty for firms that have spent years navigating unclear interpretations of the rule.
It may also encourage greater participation in U.S.-based OTC markets, which play a key role in facilitating large institutional trades that cannot easily be executed on public exchanges.
At the same time, the SEC has opened a 60-day public comment period, inviting feedback on how the rule should define “equity security” and how it should apply to digital assets going forward.
A Broader Shift in Regulatory Approach
The proposal fits into a wider pattern at the SEC.
After several years marked by enforcement-heavy actions, the agency has increasingly turned toward rulemaking and guidance aimed at clarifying how existing frameworks apply to digital assets.
Recent developments include changes to accounting guidance affecting how firms hold crypto, updates to listing standards for crypto-related investment products, and additional clarity around broker-dealer custody practices.
While these steps stop short of a comprehensive crypto framework, they suggest a move toward more tailored regulation—acknowledging that rules built for traditional markets do not always translate cleanly to blockchain-based systems.
What It Means for the Market
The proposed change to Rule 15c2-11 does not introduce new crypto-specific regulations.
Instead, it removes a point of friction created by applying legacy rules to a different type of asset.
For OTC markets, that distinction matters.
These desks are critical for institutional trading, where large orders require discretion and minimal market impact.
Reducing compliance uncertainty could make it easier for firms to operate domestically rather than relying on offshore alternatives.
At the same time, the proposal does not resolve broader questions around how crypto should be classified or regulated.
It is a narrow fix—but one that addresses a long-standing issue in how crypto interacts with traditional rules.
Whether it leads to deeper liquidity or increased institutional participation will depend on how the industry responds to finalized rules.
For now, it marks a shift away from forcing crypto into existing frameworks—and toward adapting those frameworks to fit the asset class.
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Prashant Jha is a seasoned crypto journalist based in Delhi, India, with a Bachelor’s Degree in Computer Science Engineering. Passionate about the evolving world of blockchain and cryptocurrencies, he has been a dedicated voice in the industry since 2018. Prashant’s expertise lies in regulatory reporting, where he unravels complex legal and financial developments with clarity and precision. Before joining CCN in 2024, he honed his craft at Cointelegraph, establishing himself as a trusted name in crypto journalism.
His coverage spans major industry events, including the high-profile collapses of FTX, Three Arrows Capital (3AC), and LUNA, offering readers insightful analyses of their regulatory and market implications. Prashant’s technical background enables him to bridge the gap between intricate blockchain technology and its real-world applications, making his work accessible to novices and experts.
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