In her speech on “Digital Asset Securities – Common Goals and a Bridge to Better Outcomes,” Commissioner Caroline Crenshaw, who “sometimes read(s) Crypto-twitter,” is calling for a meaningful exchange of ideas between innovators and regulators.
Digital assets, which represent a “small but growing portion of the economy,” are evolving rapidly, but few such projects have gone through the registration process, she said on Tuesday.
Talking about safe harbors, as one of the suggested paths to regulation, Crenshaw said she is not in complete favor of it.
SEC Commissioner Hester Peirce, aka ‘Crypto Mom,’ is the one who first introduced the concept of Safe Harbor for crypto last year and then introduced proposal 2.0 this year. Last week, Peirce spoke at the Texas Blockchain Summit, where she called government regulators to set clear rules that respect the unique attributes and challenges of life on the crypto frontier.
Meanwhile, fellow commissioner Crenshaw said she sees merit in aspects of the safe harbor proposal involving projects providing the names and biographies of team members. While honest disclosures of a development team is a necessary step in an industry “that promotes transparency,” it is not sufficient, according to Crenshaw, as the projects in exemption proposals grapple with unique characteristics — network effects, and the project’s choice to use a token with speculative profit potential to raise funds.
“I remain a bit skeptical that projects can only generate sustainable and valuable network effects primarily from profit-seeking investors, rather than people who actually want to use the network as designed.”
Additionally, granting a special exemption to projects raising capital by selling tokens “would provide unfair advantages to blockchain-related businesses and disadvantage everyone else.” Crenshaw is simply “not convinced” that crypto projects “should be able to raise money more cheaply and with fewer burdens.”
Crenshaw argues that a safe harbor during the ICO boom of 2017 and 2018 would have been “even worse” for investors and markets.
Instead of a harbor, she advocates for a bridge where “market participants accept proactive responsibility for compliance.”
While Crenshaw does “not think there has been a lack of clarity from the SEC,” she also acknowledges that it is not simple for developers to employ digital asset securities in new blockchain network applications in a compliant manner.
She wants crypto businesses to come to the SEC and talk to them about “why some exemption is appropriate.”