SEC Announces Top Ten Priorities of Crypto Working Group, Website Officially Launched

Original Title: "SEC Announces Top Ten Priorities of Crypto Task Force, Website Officially Launched!"

Original Translation: Mary Liu, BitpushNews

A new broom sweeps clean.

Following Gary Gensler's departure, the new leadership of the U.S. Securities and Exchange Commission (SEC) has been very active recently. Today, they officially launched a new cryptocurrency task force website: https://www.sec.gov/about/crypto-task-force, and announced the top ten priorities. This series of actions marks a significant shift in the SEC's regulatory strategy towards cryptocurrency assets, transitioning from the previous emphasis on "enforcement" to a more balanced approach of "guidance and regulation."

From defining the security attributes of cryptocurrency assets to exploring cross-border regulatory cooperation, this "priority list" authored by Cryptocurrency Task Force Leader and SEC Commissioner Hester Peirce covers several core issues in the crypto space. Meanwhile, the implications of reduced enforcement efforts provide industry participants with more breathing room, representing a more flexible and inclusive regulatory environment that is taking shape. Whether investors, entrepreneurs, or industry observers, these developments are worth close attention.

Below is the original text with some minor edits for readability:

The Journey Begins

When I was a kid, my family used to drive from Ohio to Maine for vacation every year. It was a completely different era. There were no cell phones, so if the car broke down, we couldn't call for help; no GPS navigation apps, only paper maps and handwritten directions; no online hotel bookings, just pulling over to ask if there were any vacancies when we saw a sign. No podcasts or audiobooks, just the crackling radio barely picking up local stations. My brothers and I didn't have backseat screens to watch videos, only a game of "low-tech" – spotting and collecting license plates from passing cars. Today, road trips are very different. In most ways, technology has made travel more enjoyable and safer.

The newly announced Crypto Task Force embarking on the "crypto journey" should also be more pleasant and safe than the road the SEC has led the industry down over the past decade.

During the past journey, the Commission refused to use its regulatory tools at hand, instead repeatedly hitting the enforcement brakes, proceeding along a winding and meandering road with no clear destination in sight for anyone. But just as modern technology cannot completely eliminate the risks of a road trip, this journey toward regulatory clarity is still fraught with danger. Both the Commission and the public need to remain vigilant, 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 enthusiastic public to help us navigate. With this assistance, I hope we can reach a better place than we imagined, rather than stumbling as we did on the last crypto journey. Before discussing the workgroup's commitment and opportunity, please allow me to make some important disclaimers.

First, although I am now responsible for leading the SEC's new cryptocurrency workgroup, the views I express are my own and do not necessarily represent the SEC or other commissioners' positions. The Commission's position always needs to be determined through a Commission vote.

Second, we have spent a long time in this state of confusion and will need some time to get out of it. The Commission has been engaging with the crypto industry in various forms for over a decade. In 2013, the first Bitcoin exchange-traded product (ETP) application was brought before us, and that same year, the Commission dealt with a crypto-related fraud case. In 2017, we published the DAO 21(a) Report, applying the Howey Test to the crypto space for the first time. Since then, we have taken numerous enforcement actions, issued several no-action letters, provided some exemptions relief, mentioned crypto issues countless times in speeches and statements, met with many crypto entrepreneurs, participated in multiple cross-agency and international crypto workgroups, discussed aspects of crypto in rulemaking proposals, reviewed crypto-related issues in registration statements and other filings, and approved several rule changes for listing crypto exchange-traded products proposed by self-regulatory organizations (SROs). However, the Commission's handling of crypto has always faced legal uncertainty and commercial impracticalities.

Therefore, many cases are still in litigation, many rules are still in the proposal stage, and many market participants are still in limbo. Untangling these complex issues, including ongoing litigation, will take time. This will involve efforts across the entire agency and cooperation with other regulatory bodies. Please be patient. The workgroup aims to reach a good destination, but we need to achieve this goal in an orderly, practical, and legally defensible manner.

Third, the workgroup aims to head to a destination where people can freely experiment and build interesting things, not a haven for fraudsters. The reason the U.S. capital markets are so robust, efficient, and effective is, in part, because we have established rules designed to protect investors and market integrity, and we enforce these rules. We do not tolerate scammers, fraudsters, and cheats. As the workgroup helps develop this regulatory framework, anti-fraud protections will be carefully considered. If the Commission finds fraudulent behavior beyond our jurisdiction, cases can be referred to other regulatory bodies. If no regulatory body has jurisdiction over the matter, the Commission can bring this loophole to Congress's attention.

Fourth, the working group is striving to help create a regulatory framework that can both achieve the committee's key regulatory objectives (including investor protection) and preserve the industry's ability to provide products and services. This framework will operate within the statutory authority granted to the committee, and we will also collaborate with other regulatory bodies operating within their statutory authority. Current law does not allow a free-for-all within our jurisdiction. Congress has set the parameters, and the committee will enforce them. Congress has also granted us exemptions, which the committee will use judiciously. When Congress requires the committee to impose requirements on market participants, the SEC's rules will not allow you to do as you please. Some of these rules will bring costs and other compliance burdens, which may be uncomfortable for some, and the committee will use its enforcement tools when necessary to address non-compliance.

Fifth, committee staff are working diligently to process exemption relief applications, no-action letter requests, and registration statements, but an increase in the volume of applications may pose challenges. Applications that comply with technical and legal requirements, undergo reasonable legal analysis, and provide comprehensive and timely responses to staff inquiries will help conserve committee resources and achieve regulatory clarity goals more quickly and smoothly. As always, this due diligence will help applications smoothly navigate the approval process; conversely, a lack of due diligence can lead to unnecessary delays. Being the first to submit an application does not necessarily mean being the first to be approved.

Sixth, the new commitment to a better regulatory environment should not be seen as an endorsement of any cryptocurrency or token. Whether these tokens or tokens fall within our jurisdiction or not, the committee never endorses any product or service; there is no such thing as an SEC approval stamp. Issuing tokens and tokens is easy. If people want to buy tokens or products without a clear long-term value proposition, they are free to choose, but they should not be surprised if the price drops someday. In this country, people generally have the right to make decisions for themselves, but the wonderful flip side of this American freedom is an equally wonderful American expectation: people must decide for themselves rather than rely on "government mommy" to tell them what to do or not to do, nor should they expect government assistance when they make wrong decisions.

Now, with these somewhat stiff disclaimers out of the way, let's talk about the working group's collaboration with the staff of various policy departments of the committee. We will collaborate with other federal government departments, state securities regulators, and international counterparts. We invite builders, enthusiasts, and skeptics to engage with us and discuss what the final rules should be and what interim measures can be taken during this period to promote innovation. Committee staff have reached a milestone by rescinding Staff Accounting Bulletin 121, but there is still much work to be done. The following list is not exhaustive and is not arranged in order of priority or expected completion.

· Security Status: The status of a cryptocurrency asset under securities laws is key to addressing many other issues. The working group is striving to research various types of cryptocurrency assets.

· Scope Definition: The working group will help identify some areas that fall outside the committee's jurisdiction. As a first step, staff welcomes no-action letter requests. A no-action letter is typically a statement issued by staff in response to a particular situation, indicating that enforcement action will not be recommended to the committee in those circumstances. Such a statement is specific to the situation but also provides the public with a window into staff thinking.

· Token Issuance: The working group is also considering recommending that the committee take action to provide certain token issuers with temporary forward-looking and retrospective relief, provided that the issuing entity or another willing entity provides certain specific information, keeps the information updated, and agrees not to challenge the committee's jurisdiction in fraud cases involving the asset's trading. These tokens would be treated as non-securities, allowing them to trade freely on secondary markets not registered with the SEC as long as the information stays up to date and accurate. This approach will bridge the gap until more permanent rules or legislation are established. It will provide a path for existing tokens to navigate out of the uncertainty fog and encourage more disclosure.

· Registered Offerings: The working group will consider working with staff to recommend modifications to the existing registration paths, including Regulation A and crowdfunding, to provide viable avenues for those interested in registering token offerings.

· Special Purpose Broker-Dealers: The working group will explore the possibility of updating the current ineffective no-action statement for special purpose broker-dealers. A preliminary change we may propose is to expand the scope of the statement to cover broker-dealers that custody both security and non-security cryptocurrency assets. We will collaborate with the public to identify other registration barriers.

· Investment Adviser Custody Solutions: We will work with investment advisers to provide an appropriate regulatory framework that allows advisers to securely, legally, and practically custody client assets either on their own or through third-party custody.

· Crypto Lending and Staking: We need clarification on whether crypto lending and staking programs fall under securities law jurisdiction and, if so, how. We plan to help address how these programs can be legally structured.

· Crypto Exchange-Traded Products: The committee has received rule change proposals from self-regulatory organizations for listing new types of crypto exchange-traded products. The working group will collaborate with staff to provide a clear statement on the approach used to approve or disapprove these applications. The group will also assist staff and the committee in considering requests to modify certain features of existing exchange-traded products, including allowing collateralization and in-kind creation and redemption. However, before these changes are implemented, the committee may need to make progress on custody and other issues.

· Clearinghouses and Transfer Agents: The working group also plans to study the intersection of crypto with clearinghouse and transfer agent regulations. We will continue to collaborate with market participants interested in tokenizing securities or using blockchain technology in other ways to modernize traditional financial markets.

· Cross-Border Sandbox: Many crypto projects have an international scope. The working group is considering how to facilitate cross-border experiments on a limited scale and within a temporary time frame, and may explore more permanent, long-term solutions.

This brief overview of how the working group views the future journey is not exhaustive or final, but I hope it sparks your interest. Despite the numerous obstacles to reaching a destination of reasonable, clear rules, the journey will be exciting and beneficial if we can collaborate.

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