It seems that, nowadays, the SEC is intent on burying its cryptocurrency regulations under a heap of legalese. For many projects, it feels as though having to exit an escape room from regulators.
SEC Commissioner Hester Pierce—often called “crypto Mama”—has spoken out on her own agency’s response to the question of broker-dealer firms wanting to offer security tokens. The document she mentions was released by FINRA and the SEC, has put brokers who are looking to sell security tokens in limbo. The only cryptocurrencies currently in the clear are Bitcoin and Ethereum which the SEC has explicitly said are not securities.
According to the SEC, brokers are unable to account for digital assets like they can traditional assets. Protection Rules are also hard to enforce since, if hacked, the broker cannot retrieve the tokens. Only a few broker-dealers specializing in crypto-assets have been approved.
Pierce called the SEC’s currently strategy like a “regulatory escape room,” with many confusing riddles and dead-ends. In many ways, she’s exactly right. Switzerland, for example, has not taken this confusing approach but instead has opted to free the space for investment. Many other countries, like Singapore, are drafting entirely new legislation dedicated to the cryptocurrency question. Yet, when it comes to the SEC, it seems intent on the “wait and see approach.” This approach might have worked in 2017, but in 2019 it leaves much to be desired.
Crypto-assets are unique since they require special custodial services, so the issue will likely not resolved anytime soon. All we can hope for is that the SEC learns from other regulatory regimes and takes notes: as of right now, the American STO sector is falling behind.
Do you believe that the SEC is making STO approvals and crypto-regulation unnecessarily complicated? Let us know your thoughts below.
Image courtesy of NPR.