Introduction
As technology evolves, the U.S. Securities and Exchange Commission (SEC) must evolve with it. Nowhere is this truer than in crypto, where the market for digital assets has surged, demanding a comprehensive regulatory framework that not only protects investors but also fosters innovation. This article proposes actionable steps for the SEC to transition from a predominantly enforcement-focused approach to a more balanced regulatory strategy.
Guidance on Airdrops
The SEC should clarify how blockchain projects can offer cryptocurrency rewards, known as airdrops, without being classified as securities offerings. By establishing clear guidelines, the SEC can prevent the offshoring of these initiatives, ensuring that U.S. investors benefit from developments in blockchain technology.
Modification of Crowdfunding Rules
Current regulations are inadequate for crypto startups that require a wider investor base. The SEC should revise these rules to increase funding limits and allow broader access to funding platforms, while still safeguarding investors with caps on individual investments and stringent disclosure requirements.
Enabling Broker-Dealers in Crypto
The existing barriers preventing traditional broker-dealers from trading in crypto assets must be addressed. Allowing these entities to register would enhance market participation and increase liquidity, thus benefiting both investors and the overall market.
Custody and Settlement Guidance
Ambiguity regarding how financial institutions can custody crypto assets hampers market growth. The SEC needs to clarify the regulatory treatment of custodians, provide specific guidance on the settlement of crypto transactions, and rectify outdated accounting practices that hinder institutional involvement.
Reforming ETP Standards
The SEC must adopt reform measures for exchange-traded products (ETPs) to spur innovation in the sector. By returning to a more practical market-size test and allowing ETPs to settle directly in the underlying asset, the SEC can promote better market access and transparency.
Implementing Certification for ATS Listings
To enhance transparency in the decentralized crypto market, the SEC should establish a clear certification process for assets listed on alternative trading systems (ATS). This initiative will ensure that investors have access to accurate and current information about crypto assets, fostering greater market integrity.
Key Takeaways
- The SEC must evolve its regulatory approach to address the complexities of the growing crypto market.
- Clear guidance on airdrops and crowdfunding can enhance investor protections while nurturing innovation.
- Removing barriers for broker-dealers and clarifying custody rules are essential for market liquidity.
- Reforming ETP standards and developing a certification process can foster transparency and market integrity.
