Crypto Course Correction at the SEC
Yesterday, February 4, 2025, SEC Commissioner Hester Peirce shared her first policy statement since being charged with leading the Commission’s new Crypto Task Force.
It will come as no surprise that her statement is nothing less than a wholesale (and for many market participants, welcome) course correction on the Commission’s crypto canon. In her own words:
it took us a long time to get into this mess, and it is going to take us some time to get out of it … the Commission’s handling of crypto has been marked by legal imprecision and commercial impracticality … many cases remain in litigation, many rules remain in the proposal stage, and many market participants remain in limbo … Please be patient. The Task Force wants to get to a good place, but we need to do so in an orderly, practical, and legally defensible way.
Commissioner Peirce stressed that the fundamentals of U.S. securities regulation will not change: individual participants will still be able to make their own investment decisions (even bad ones), and the SEC will still sanction “liars, cheaters, and scammers.”
In terms of specific priorities, Commissioner Peirce suggested several possibilities, including:
- Assessing when and how to designate crypto assets as “securities.”
- Identifying the limits of the Commission’s jurisdiction with respect to crypto assets.
- Designating, on a temporary basis, coin or token offerings with robust disclosure regimes as “non-securities … until a more permanent rule or legislation could be finalized.”
- Modifying “existing paths to registration [including crowdfunding]” for crypto assets.
- Providing an “appropriate regulatory framework” for investment advisers to satisfy their custody obligations over crypto assets; for broker dealers to custody crypto assets that are, and that are not, securities; and to enable clearing agency and transfer agents to explore tokenization and other blockchain applications.
- Determining which crypto-lending and staking programs are governed by the securities laws and how to structure them in a compliant manner.
- Providing guidance to exchanges on listing crypto exchange-traded products and on how to enable staking and in-kind creations and redemptions.
Perhaps the clearest point of departure from prior Commission practice is in the Commissioner’s tone. The prior message sent to the digital assets community was often summarized as “come in and register” (or, presumably, expect to be sanctioned), notwithstanding the absence of an operational registration and regulation regime. Commissioner Peirce, in contrast, stated that “We invite builders, enthusiasts, and skeptics to engage with us to figure out what the final rules should be and what interim steps might help to foster innovation in the meantime.” It will take some time to assess the effectiveness of this approach, but many market participants will welcome the opportunity to re-engage with the Commission on a fundamental level.