By George Ward
A top US Securities and Exchange Commission (SEC) official has called for a comprehensive and transparent legal framework for all classes of assets, including crypto. The official warned that the current enforcement move of the commission would take a long time to evaluate all digital tokens deemed securities.
A Call for Crypto Regulation
In her speech at the recent Digital Assets at Duke Conference, the SEC commissioner, Hester Peirce, talked about the importance of regulating the crypto industry. According to her, the securities watchdog has pursued its compliance violations randomly, which in most cases occurred years after the initial offering of an asset.
The commissioner stressed the need to develop a coherent and reliable legal framework that would work for all asset classes. She added that the SEC’s imprecise application of the rules had created subjective and harmful outcomes for digital asset projects and consumers.
Furthermore, the commissioner reiterates that when the regulator insists on applying the same inconsistent securities law, the effect is on the secondary buyers of the assets as they are left holding a stash of tokens they cannot use to trade. “We need a special handling mechanism consistent with the existing securities laws as most of the enforced requirements are made under a strict standard that is unreliable,” Peirce added.
The SEC official discussed the need for a coherent legal framework as part of the securities laws, citing the regulation-by-enforcement approach as an unsustainable drive. For a rule to be consistent, the commissioner stressed that it must have universal coverage as soon as it is implemented, which is what SEC must strive to achieve.
Adopting Rational Regulatory Framework
According to Peirce, a rational framework should be the basis to ensure compliance from good-faith actors in the crypto space with the SEC given the freedom to go after the bad-faith actors who failed to comply with the securities laws. Peirce, however, cautioned that cryptocurrency regulation is not a walk in the park, and many countries are struggling to adopt the proper guidelines.
She believes that the sector’s profitability will likely drop if crypto exchanges are treated like conventional financial institutions, with heavy capital requirements and legal recruitment. It is worth noting that commissioner Peirce has, on numerous occasions, warned about the way her agency has been moving in terms of regulatory enforcement in the crypto environment.
In addition, she has repeatedly criticized the SEC’s enforcement-based regulatory approach. Interestingly, Peirce believes that the securities watchdog should have approved the many applications for a spot Bitcoin exchange-traded fund (ETF).
Last May, the commissioner raised concern that the SEC does not allow FinTech innovation to flourish. Many notable government officials share similar views with Peirce regarding how the Gary Gensler-led commission has handled the regulatory oversight of the crypto ecosystem.