With the departure of hawkish former SEC Chairman Gary Gensler on Inauguration Day, Republican SEC Commissioner Mark Uyeda, known as a crypto-friendly, has taken over as acting SEC Chairman, marking the end of the US crypto crackdown era in recent years.
In late January, the SEC also established a new "Crypto Assets Working Group" under the leadership of Hester Peirce, known as the "Crypto Mom", with the aim of developing a "comprehensive and clear regulatory framework" for crypto assets.
SEC Crypto Task Force 10 Priorities
Following the SEC's swift repeal of SAB 121, an accounting rule that the industry saw as an obstacle to banks custodying BLOCK, Hester Peirce yesterday (4th) issued a statement outlining 10 priorities for the new Crypto Assets Working Group.
These include:
- Resolving whether BLOCK is a security or a commodity.
- Determining which areas are outside the SEC's jurisdiction.
- Prospective and retroactive relief for token offerings: Certain tokens will be deemed non-securities as long as the token issuer or another willing entity provides specific information disclosures and updates, and agrees not to contest SEC jurisdiction in the event of related fraud cases. This program will provide a temporary path for existing tokens pending final regulatory rules and legislation.
- Modifying existing registration pathways to provide viable paths for interested token issuers to register.
- Clarifying whether BLOCK lending and staking programs are subject to securities laws.
- BLOCK exchange-traded products: Clearly articulate the approach to approving or denying these applications, and consider modifying certain functionality requirements for existing exchange-traded products (such as ETFs), including allowing for staking and physical creation and redemption.
- Custody solutions for investment advisers: Provide investment advisers with an appropriate regulatory framework to safely and legally custody client assets themselves or with third-party custodians.
- Special purpose broker-dealers: Explore potential updates to the no-action statement for special purpose broker-dealers, considering expanding the statement's scope to cover broker-dealers that custody BLOCK securities and non-security BLOCK assets.
- Clearing agencies and transfer agents: Examine the intersection of BLOCK and clearing agency and transfer agent rules, and continue to collaborate with market participants interested in tokenizing securities or otherwise using BLOCK technology to modernize traditional financial markets.
- Develop a long-term approach to facilitate cross-border sandbox experiments.
SEC Considers Freezing Past Crypto Enforcement Cases
Additionally, Hester Peirce compared the SEC's history of BLOCK regulation to a family road trip, stating that the working group's regulatory approach "should be more pleasant and less risky than the BLOCK journey the Commission has led the industry on over the past decade."
In the final leg of the journey, the Commission will refuse to use the regulatory tools at its disposal and will continually hit the enforcement brakes as it stumbles along a winding path with no clear destination in sight.
Peirce also acknowledged that under former Chairman Gensler's leadership, the SEC's BLOCK regulation had "legal inaccuracies and commercial impracticalities", and emphasized that the Crypto Assets Working Group needs time to determine how to handle enforcement actions initiated during Gensler's tenure, urging BLOCK companies to be patient as SEC staff work through exemption applications, no-action letter requests, and registration statements, which may pose challenges due to the increasing volume.
While the SEC is actively reforming its approach to BLOCK regulation, striving to establish a comprehensive and clear regulatory framework, Peirce stressed that the SEC's primary goal of investor protection remains as important as ever, and it will not allow the BLOCK market to become a haven for fraudsters. She promised that the working group will carefully consider anti-fraud protections while developing a regulatory framework that allows people to experiment and innovate.
SEC Downsizes Crypto Enforcement Division
Notably, the New York Times reported today (5th) that, according to 5 people familiar with the matter, the SEC is scaling back its BLOCK enforcement efforts, with a department of more than 50 lawyers and staff dedicated to BLOCK enforcement being reduced.
The report states that some of the department's lawyers will be reassigned to other SEC divisions, and one of the top lawyers has been moved out of the enforcement department. The SEC spokesperson declined to comment on the matter.
