SEC Commissioner Outlines New Crypto Task Force Agenda
Commentary by Steven Lofchie and Andrew Lom
SEC Commissioner and head of the newly formed Crypto Task Force Hester M. Peirce outlined an agenda for the new initiative.
In a detailed statement, Ms. Peirce first provided some "disclaimers" as the new Task Force gets underway:
- Market participants must "be patient" as the Task Force disentangles itself from the SEC's previous handling of crypto, which was marked by "legal imprecision and commercial impracticality."
- The SEC will give careful consideration to antifraud protections and will not be a safe haven for fraudsters.
- The Task Force intends to set up a regulatory framework that both achieves regulatory objectives and preserves the industry's ability to offer products and services. (Ms. Peirce warned that "SEC rules will not let you do whatever you want, whenever you want, however you want" and "[s]ome of these rules will impose costs and other compliance burdens that some may find irritating, and the Commission will use its enforcement tools when necessary to pursue noncompliance.")
- SEC staff is currently experiencing an uptick in applications for exemptive relief, requests for no-action letters and registration statements.
- The "commitment to a better regulatory environment should not be viewed as an endorsement of any crypto coin or token."
Ms. Peirce highlighted the agenda for the Task Force, including:
- evaluating different types of crypto assets to determine their classification under securities laws;
- identifying areas outside the SEC's authority. As part of this, the staff welcomes no-action letter requests;
- exploring temporary relief measures for token issuers that provide specified disclosures;
- looking into potential modifications to Regulation A and crowdfunding pathways to create registration options for token offerings;
- assessing revisions to the special-purpose broker-dealer no-action statement, including expanding its scope to allow custody of both securities and non-securities crypto assets;
- developing a framework to enable investment advisers to safely and legally custody crypto assets, either independently or via third parties;
- providing clarity about whether (and if so, how) crypto-lending and staking programs are covered by the securities laws;
- establishing clear guidelines for approving new crypto ETPs and modifying existing ones, including allowing staking and in-kind creations and redemptions;
- exploring how blockchain and tokenization can be integrated into existing market infrastructure to modernize securities transactions; and
- considering limited-scale international collaboration to facilitate cross-border experimentation.
Ms. Peirce encouraged engagement with the Task Force via (i) written input by sending an email with the subject line "Crypto Task Force Input" to [email protected] and (ii) requests for in-person or virtual meetings with members of the public.
Commentary
There is no more thoughtful person in the United States to be in charge of this effort than Commissioner Peirce. After many years of being limited to writing carefully reasoned (and witty) dissents on ill-considered rules adopted by 3-2 votes under Chair Gensler, it is fitting that Ms. Peirce becomes the leader of the most significant change to financial regulation since the adoption of Dodd-Frank. Under Commissioner Peirce's leadership, a new crypto regulatory framework is certain to be more thoroughly considered.
Her request for public engagement with the Task Force is also notable. Here is an early contribution: A Quick and Dirty Fix for US Cryptocurrency Regulation.
Commentary
As one might expect from Commissioner Peirce, this agenda reflects thoughtful balancing between appropriate market regulation and industry innovation. It is also consistent with various prior statements and dissents that she has made.
While the task force may be focused on crypto, the agenda extends to exploring how blockchain and tokenization can be integrated into existing market infrastructure to modernize securities transactions, which has implications that are much broader than crypto.
Commissioner Peirce's statement should be read together with President Trump's Executive Order on innovation in digital assets. (See related coverage.) It is encouraging to consider the impact that these and other use cases will have across a range of industries as a result of developments in blockchain, distributed ledger and related technologies.
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