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Are there regulatory implications of being a social trader on TokenSets?
Are there regulatory implications of being a social trader on TokenSets?

Regulatory FAQs on Social Trading

Richard avatar
Written by Richard
Updated over a week ago

All information provided in this FAQ should not be considered legal advice and we encourage traders to consult their own legal professionals. The answers provided below are based on a U.S-centric view of the regulatory landscape around Social Trading which means they may not apply to the jurisdiction that you are based in.

Do social traders need to perform KYC/AML?

As there is no acceptance and transmission of funds between followers and traders during Set issuance, redemption, and rebalances, traders are not exchangers, administrators, or money transmitters under FinCEN’s framework. Thus, traders do not need to perform KYL/AML themselves or for their followers.

Do social traders require any licensing?

Given that assets on TokenSets are not regulated commodity interests (e.g. options, futures, or CFDs) or securities, there is no concept of an investment company, commodity pool, etc. Thus, traders do not need to be registered or licensed as a registered investment advisor (RIA) or commodity trade advisor (CTA).

Set Social Trading involving commodities is not a regulated activity and involves significant risk. Traders and followers will not have a central authority that can take corrective measures to protect the value of a cryptocurrency during a crisis and/or receive the benefits of protections from receiving regulated investment/commodity interest services.

Are social traders “managing” assets?

Traders on Set Social Trading are instantiating trades of their own Sets, in which the rebalance signals are provided for information purposes. Traders do not have access to the user's funds, and followers can exit their positions at any time.

That said, traders are not allowed to give investment advice on TokenSets

Neither TokenSets nor any copied person guarantees the future performance of an account. No content provided should be considered or construed as investment advice.

Are Traders allowed to take the other side of their trade when a rebalance auction kicks off?

Participation in a rebalance for one of their own Sets should be publicly disclosed. Spot market transactions are subject to anti-fraud and anti-manipulation rules of the Commodities Exchange Act. Thus, it may be considered fraudulent, misleading, or manipulative behavior to be taking the other side of a transaction without proper disclosures.

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