Original title: U.S. SEC officially announces the top ten priorities of the crypto working group, and the website is officially launched
Original translation: Mary Liu, BitpushNews
A new official starts with three things.
After Gary Gensler resigned, the new leadership of the U.S. Securities and Exchange Commission (SEC) has been very active recently. Today, a new cryptocurrency task force webpage was officially launched: https://www.sec.gov/about/crypto-task-force, and ten priorities were announced. This series of measures marks that the SECs regulatory strategy for crypto assets is undergoing a major shift, from the past law enforcement and supervision to equal emphasis on guidance and regulation.
From clarifying the securities attributes of crypto assets to exploring cross-border regulatory cooperation, the priority list written by Hester Peirce, head of the Cryptocurrency Task Force and SEC Commissioner, covers many core issues in the crypto field. At the same time, the hint of reduced enforcement also provides more breathing space for industry participants, representing that a more flexible and inclusive regulatory environment is taking shape. Whether it is investors, entrepreneurs, or industry observers, these trends are worth paying close attention to.
The following is the original text, which has been slightly edited for easier reading:
The Journey Begins
When I was a kid, my family would drive from Ohio to Maine every year for vacation. It was a completely different time. There were no cell phones to call for help if the car broke down. No navigation apps, just paper maps and directions written on scraps of paper. No online hotel reservations, so you had to stop and ask if there was a room available when you saw a sign from a distance. There were no podcasts or audiobooks, just a rustling radio that barely picked up local stations. Instead of backseat screens to watch videos, my brothers and I played a no-tech game: scanning the license plates of passing cars and collecting license plates from various states. Today, road trips are very different. In most ways, technology makes traveling more enjoyable and safer.
The “crypto journey” initiated by the newly announced Crypto Task Force should also be more pleasant and safer than the path the SEC has led the industry on for the past decade.
Throughout that journey, the Commission refused to use the regulatory tools at its disposal and kept pumping the enforcement brakes, traveling down a winding road with a destination that was not clear to anyone. But just as modern technology cannot completely eliminate the risks of a road trip, this new journey toward regulatory clarity remains fraught with danger, and both the Commission and the public will need to remain vigilant and aware of the risks and opportunities that may lie ahead. I am excited to embark on this journey with a talented group of SEC staff, and we look forward to engaging with the many enthusiastic members of the public who can help us navigate. With this help, I am hopeful that we can arrive in a better place than we ever imagined, rather than stumbling as we did on our last crypto journey. Before discussing the promise and opportunities of the Working Group, allow me to begin with a few important disclaimers.
First, although I am now responsible for leading the SEC’s new cryptocurrency working group, the opinions I express are my own and do not necessarily represent the position of the SEC or other Commissioners. The Commission’s position is always determined by a committee vote.
Second, it took us a long time to get into this mess, and it will take some time to get out of it. The Commission has been engaged with the crypto industry in one form or another for more than a decade. The first bitcoin exchange-traded product (ETP) application came before us in 2013, and the Commission also dealt with a crypto-related fraud case that same year. In 2017, we issued the DAO Section 21(a) Report, applying the Howey test to crypto for the first time. Since then, we have brought numerous enforcement actions, issued a number of no-action letters, provided some relief, raised crypto issues countless times in speeches and statements, met with many crypto entrepreneurs, participated in multiple interagency and international crypto working groups, discussed certain aspects of crypto in proposed rulemakings, reviewed crypto-related issues in registration statements and other filings, and approved multiple self-regulatory organizations (SROs) proposed changes to the listing rules for crypto exchange-traded products. However, the Commission’s treatment of crypto has been plagued by legal imprecision and commercial impracticality.
As a result, many cases remain in litigation, many rules remain in the proposal stage, and many market participants remain in uncertainty. Untangling these complex issues, including ongoing litigation, will take time. It will involve an agency-wide effort and collaboration with other regulators. Please be patient. The Working Group wants to arrive at a good destination, but we need to get there in an orderly, practical, and legally defensible manner.
Third, the Task Force wants to move to a destination where people are free to experiment and build interesting things, not a safe haven for fraudsters. The U.S. capital markets are so strong, efficient, and effective in part because we have rules designed to protect investors and the integrity of our markets, and we enforce them. We have no tolerance for scammers, fraudsters, and swindlers. Anti-fraud protections will be carefully considered as the Task Force helps develop this regulatory framework. If the Commission finds that fraud is beyond our jurisdiction, it can refer the case to another regulator. If no regulator has jurisdiction over the issue, the Commission can bring the vulnerability to the attention of Congress.
Fourth, the Task Force is working to help create a regulatory framework that achieves the Commissions important regulatory goals, including protecting investors, while preserving the industrys ability to provide products and services. This framework will operate within the statutory authority Congress has given the Commission, and we will work with other regulators operating within their statutory authority. Existing law does not allow for a free-for-all with respect to products under our jurisdiction. Congress has set the parameters, and the Commission will enforce them. Congress has also given us waivers, which the Commission will use as appropriate. Where Congress has required the Commission to impose requirements on market participants, the SECs rules do not let you do whatever you want. Some of these rules will impose costs and other compliance burdens that may be offensive to some, and the Commission will use its enforcement tools to pursue noncompliance when necessary.
Fifth, Commission staff is working diligently to process applications for exemption relief, requests for no-action letters, and registration statements, but the increased volume of applications may present challenges. Applications that comply with technical and legal requirements, provide a sound legal analysis, and provide comprehensive and timely responses to staff questions will help conserve Commission resources and achieve the goal of regulatory clarity more quickly and smoothly. As always, such due diligence will help applications move more smoothly through the approval process; conversely, a lack of due diligence may result in unnecessary delays. Being the first to file does not necessarily mean being the first to be approved.
Sixth, a new commitment to a better regulatory environment should not be viewed as an endorsement of any crypto coin or token. The Commission never endorses any product or service, whether or not it falls under our jurisdiction; there is no such thing as an SEC stamp of approval. It is easy to issue coins and tokens. If people want to buy a token or product that lacks a clear long-term value proposition, they are free to do so, but they should not be surprised if the price goes down one day. In this country, people generally have the right to make decisions for themselves, but the counterpart of this wonderful American freedom is an equally wonderful American expectation: People must decide for themselves, not expect Government Mom to tell them what to do or not to do, and not expect the government to bail them out when they make the wrong decision.
Now that those slightly blunt disclaimers are out of the way, let’s talk about what the Task Force is working on with staff across the Commission’s policy divisions. We will be working with other parts of the federal government, state securities regulators, and our international counterparts. We invite builders, enthusiasts, and skeptics to engage with us on what the final rule should be and what interim measures can be taken in the meantime to foster innovation. Commission staff has achieved one milestone—withdrawal of Staff Accounting Bulletin 121—but there is much more work to do. The following list is not exhaustive, nor is it in order of priority or expected completion.
Securities Status: The status of crypto assets under securities laws is key to resolving many other issues. The working group is working hard to examine different types of crypto assets.
· Scoping: The Working Group will help identify areas that are outside the Commission’s jurisdiction. As a first step, staff welcomes requests for no-action letters. No-action letters are typically statements from staff regarding specific circumstances, stating that no enforcement action will be recommended to the Commission in those circumstances. Such statements are situation specific, but they also provide the public with a window into staff thinking.
Token Offerings: The Working Group is also considering recommending that the Commission take action to provide temporary prospective and retroactive relief for certain token offerings, provided that the issuing entity or other entity willing to assume liability provides certain specified information, keeps the information updated, and agrees not to challenge the Commission’s jurisdiction in cases of fraud involving the sale or purchase of that asset. These tokens would be considered non-securities and therefore could be freely traded on secondary markets that are not registered with the SEC, as long as the information is kept updated and accurate. This approach would bridge the gap until more permanent rules or legislation are finalized. It would provide a path out of the fog of uncertainty for existing tokens and encourage more disclosure.
Registered Offerings: The Working Group will consider working with staff to recommend that the Commission modify existing registration pathways, including Regulation A and crowdsales, so that there are viable avenues for those interested in registering token offerings.
Special Purpose Brokers: The Working Group will explore the possibility of updating the Special Purpose Broker Declaration of No Objection, which has not been successful in its current form. An initial change we may recommend is to expand the declaration to cover brokers that custody both crypto-asset securities and non-securities crypto-assets. We will work with the public to identify additional barriers to registration.
Custody Solutions for Investment Advisors: We will work with investment advisors to provide an appropriate regulatory framework that enables advisors to safely, legally, and practically custody client assets themselves or through a third party.
Crypto lending and staking: We need clarity on whether crypto lending and staking programs are subject to securities laws, and if so, how. We plan to help address how these programs are legally structured.
Crypto Exchange-Traded Products: The Commission has received proposals from self-regulatory organizations for rule changes to list new crypto exchange-traded products. The Working Group will work with staff to provide clear statements on the approach used in approving or denying these applications. The Working Group will also assist staff and the Commission in considering requests to modify certain features of existing exchange-traded products, including allowing for collateralization and physical creation and redemption. However, the Commission may need to make progress on custody and other issues before these changes are implemented.
Clearing Houses and Transfer Agents: The Working Group also plans to examine the intersection of crypto with clearing house and transfer agent rules. We will continue to work with market participants interested in tokenizing securities or otherwise using blockchain technology to modernize traditional financial markets.
Cross-border sandboxes: Many crypto projects have an international scope. The working group is considering how to facilitate cross-border experimentation on a limited scale and temporary timeframe, and potentially explore more permanent, long-term solutions.
This brief overview of how the Working Group sees the journey ahead is not exhaustive or final, but I hope it sparks your interest. While there are many obstacles to reaching the final destination of a sensible, clear set of rules, the journey will be exciting and rewarding if we can work together.
