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Caroline Bishop Jan 25, 2025 06:10
The SEC is urged to adapt its regulatory approach to the evolving crypto landscape, focusing on guidance for airdrops, crowdfunding, and broker-dealer operations.
As the digital landscape continues to evolve, the U.S. Securities and Exchange Commission (SEC) faces increasing pressure to adapt its regulatory framework to better accommodate the burgeoning crypto industry. According to a16z crypto, the SEC has an opportunity to modernize its approach through innovative measures and a newly established crypto task force.
Guidance on Airdrops and Incentive Rewards
The SEC is encouraged to provide clear guidance on airdrops and incentive-based rewards, which are essential for blockchain projects to build community and decentralize control. These distributions often occur without traditional security offerings, yet current regulations do not adequately address their unique nature. By clarifying these rules, the SEC could prevent the offshoring of blockchain technology ownership and promote domestic innovation.
Revamping Crowdfunding Rules
Current crowdfunding regulations are seen as inadequate for crypto startups, which require a broader reach to build network effects. Suggested reforms include raising capital limits and allowing crypto projects to use exemptions similar to Regulation D, making it easier for these projects to access a wider investor base while maintaining transparency and investor protection.
Facilitating Broker-Dealer Participation
The regulatory environment restricts broker-dealers from engaging in crypto markets. The SEC is urged to streamline registration processes for these entities, allowing them to manage both crypto assets classified as securities and those that are not. This would enhance market liquidity and investor access, fostering a more robust and integrated financial ecosystem.
Custody and Settlement Clarity
Ambiguities in custody and settlement regulations hinder institutional adoption of crypto assets. By providing tailored guidance that addresses multi-signature wallets and secure storage, the SEC can enable traditional financial institutions to safely manage crypto assets, thus broadening market participation and enhancing investor protection.
Reforming Exchange-Traded Product Standards
To foster financial innovation, the SEC is advised to reform standards for exchange-traded products (ETPs), allowing for physical settlement and robust custody standards. This would align crypto ETPs with traditional asset standards, promoting broader market access and investor confidence.
Enhancing Disclosure for Crypto Assets
Implementing a 15c2-11 certification for alternative trading system (ATS) listings would require platforms to provide accurate and current information about crypto assets. This measure would ensure transparency and market integrity, encouraging informed investor decisions and discouraging offshore trading practices.
The SEC stands at a pivotal juncture in shaping the future of crypto regulation. By embracing these proposed changes, the Commission can transition from a purely enforcement-focused approach to one that balances regulatory clarity with innovation support. Such a shift is vital for maintaining the competitiveness of U.S. markets and safeguarding investors in the rapidly evolving digital economy.
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