SEC Launches Cyrpto Task Force

Securities and Exchange Commission Acting Chairman Mark Uyeda launched a “Crypto Task Force” dedicated to developing a comprehensive and clear regulatory framework for cryptocurrency assets. The task force will dedicate itself to developing a “comprehensive and clear regulatory framework for crypto assets.”

The task force’s focus will be to assist the SEC in defining clear rules and boundaries for regulatory oversight and develop practical and achievable ways for companies, securities, or financial products to comply with SEC registration requirements. It will also create guidelines for companies to provide necessary and meaningful disclosures to investors without being overly burdensome or impractical.

The SEC perceives such the task force as way to both ensure that the agency itself performs better and to provide more clarity when it comes to crypto regulation. According to the SEC the task force will collaborate with agency staff and the public to “set the SEC on a sensible regulatory path that respects the bounds of the law.”

While under the leadership of former Chair Gary Gensler, the SEC faced much criticism on its approach to crypto regulation. Until the launch of this task force, the SEC primarily relied on enforcement actions that would have a retroactive regulatory effect on crypto rather than proposing clearcut rules.

“To date, the SEC has relied primarily on enforcement actions to regulate crypto retroactively and reactively, often adopting novel and untested legal interpretations along the way,” according to a SEC press release. “Clarity regarding who must register, and practical solutions for those seeking to register, have been elusive. The result has been confusion about what is legal, which creates an environment hostile to innovation and conducive to fraud. The SEC can do better.”

The Task Force’s Specific Focuses

According to the SEC, the task force’s undertaking will “take time, patience, and much hard work. It will succeed only if the task force has input from a wide range of investors, industry participants, academics, and other interested parties.” Many crypto firms have already begun submitting proposals such as allowing traditional broker-dealers to operate in the cryptocurrency market. in its mission to create a regulatory framework

Although it has and continues to receive ideas from crypto firms, the task force will prioritize the following objectives  its mission to create a regulatory framework:

• Security Status: The task force is studying different types of crypto assets to determine how securities laws apply to them, as this affects many other regulatory questions.
• Defining Jurisdiction: The task force is identifying areas that may not fall under SEC oversight.
• Coin and Token Offerings: The task force is considering temporary rules to allow certain token offerings to operate without uncertainty, as long as the issuer provides regular, accurate disclosures and agrees to SEC oversight in fraud cases. This would offer clarity until permanent rules or legislation are established.
• Registered Offerings: The task force will explore ways to improve existing registration options, to make it easier for token issuers to comply with SEC rules.
• Special Purpose Broker-Dealer: The task force is looking at revising the special-purpose broker-dealer framework, including allowing firms to hold both securities and non-securities crypto assets, and identifying other registration challenges.
• Custody Solutions for Investment Advisors: The task force will work with investment advisers to provide an appropriate regulatory framework within which advisers can safely, legally, and practically custody client assets themselves or with a third-party.
• Crypto Lending and Staking: The task force aims to clarify whether crypto lending and staking programs are subject to securities laws and, if so, how they can be structured to comply with regulations.
• Crypto Exchange-Traded Products (“ETPs”): The task force will help the SEC clarify its decision-making process for approving or rejecting new crypto ETPs. It will also consider updates to existing ETPs, like allowing staking or different ways of handling fund shares, but custody and other issues must be addressed first.
• Clearing Agencies and Transfer Agents: The task force will explore how blockchain and crypto assets fit within clearing and transfer rules, including their role in modernizing traditional financial markets.
• Cross-Border Sandbox: Since many crypto projects operate globally, the task force is considering ways to support limited, temporary international regulatory experiments, with the possibility of long-term solutions.

Although the task force initially said that it is open to ideas from industry participants and academics, it also welcomes public input. Anyone who would like to submit a comment to the task force can do so at Crypto@sec.gov.