Although the Securities and Exchange Commission (SEC) has talked up the innovative potential of blockchain for years, it has done little to regulate it aside from limited “outreach programs.” This lackluster involvement could cause the U.S. to lag behind other countries in terms of legal regulation, mass adoption, and institutional integration of digital assets.
In early April, the SEC put out their long-awaited guidelines for digital assets. The purpose of the statement was to clarify the SEC’s regulatory approach, yet it didn’t bring anything new to the table. It was still based on the Howey Test, generally used to determine securities, and merely told us what we already know.
However, we’ve reached a point where ‘regulatory clarity’ is simply not enough. In fact, the SEC has been backlogged with pending approvals. Many of these have non-existent time frames. The SEC also been largely silent on granting licenses to any alternative trading platforms and blockchain-related broker-dealers.
For this, they should be rightly criticized. After years, the number of approved token issuances, broker-dealers, and token exchanges is virtually zero—and that’s worrying.
As Scott Purcell, CEO of PrimeTrust, put it:
“Jay Clayton, Chairman of the SEC, is, I’ve heard, holding the line that no new alternative trading system (“ATS”, aka “exchange”) will be approved on his watch if it intends to trade tokens.”
Others in the cryptocurrency space have echoed similar sentiments.
Outreach with No Substance
Last month, FINRA and the SEC jointly announced their broker-dealer “Outreach Program.” The event is scheduled for this June . Allegedly, there “hot topics” within the digital asset world are to be discussed.
At least, that’s how the event is billed.
The sad truth is that the event is capped at 250 participants. Furthermore, only attendees will supposedly be to licensed broker-dealers.
Currently, there are over 40 applications submitted to the SEC by blockchain-focused companies to become registered broker-dealers. So far, none have received even proper responses. Many are way past deadline.
It now appears possible that innovators, influencers, investors, and others working in the digital asset industry will be ignored. The primary influencers over legal regulation may very well be outsiders with little experience in the blockchain space.
The SEC Should Take Responsibility
The SEC and FINRA are pointing fingers at one another, but ultimately it appears that the SEC is to blame. Many potential token issuers have filed for Reg + qualifications for their digital assets, but few if any have been approved by the SEC.
The irony in all this is that the blockchain industry actively wants regulation. It’s not as if responsibilities are being skitted. Instead, it’s the SEC that is actively ignoring its own deadlines.
If the SEC is unable to get its act together, the sad truth is that many blockchain companies will just stay away from the United States altogether. Therefore, the U.S. has a good chance of falling behind if this is not resolved—but maybe that’s what’s cynically needed to nudge the SEC to clean its act up.
Do you think the SEC has been neglecting its basic duties to the blockchain space? Let us know your thoughts below.