Cryptocurrency

SEC Advisory Committee Member Calls for Agencies to Open for Public Comment on Crypto Regulation

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JW Verret, associate law professor and member of the SEC’s Investor Advisory Committee, called on government agencies to openly seek public comment on digital asset regulation.

Verret in Petition to SEC Secretary Vanessa Countryman Say Opening up to comment on digital assets could serve as a genesis for the SEC to reform its regulation of digital assets. Verret says he is a Bitcoin holder (bitcoin), ether (Ethereum), as well as “many Tier 1 and Tier 2 tokens readily available on top exchanges,” and concerns about how the SEC might crack down on tokens that aren’t currently considered securities.

“Based on the SEC’s interpretation of the Howey Test’s ‘strategically ambiguous’ interpretation of the classification of investment contracts, I cannot be sure that the SEC will not in the future use the guise of the Commission’s investor protection mission in a way that would end up costing me materially as an owner, ” Verret said. “This public consultation is the only way to properly crowdsource this issue and properly formulate the genesis block for digital asset regulation.”

Since the 1940s, the SEC has used the Howey test to determine whether certain assets qualify as “investment contracts” and are considered securities. Many experts see the SEC’s 2017 DAO report as one of the most important regulatory moments for cryptocurrencies in the U.S., stating that digital assets do qualify.

Citing his experience as a law professor, Verret suggested that the SEC’s Howey test for digital assets was inconsistent with language used in a Supreme Court decision that could lead to the Supreme Court overturning the 1946 case:

“The SEC’s current curriculum appears to be designed to strategically use the Howey test as a weapon to combat the sale of tokens (and token trading services and technologies) that cannot reasonably be registered as securities (or stock exchanges) under enacted regulations. cases. ’33 and ’34, even if they wanted and were required to do so (though neither is necessarily true). I believe this is ultimately a losing strategy for the SEC as an agency.”

According to Verret, the SEC’s current regulatory path does not appear to recognize that “digital assets themselves are not designed to fit within the classic regulatory framework designed for board-led corporate equity investments.” The law professor also criticized the U.S. SEC Chairman Gary Gensler’s How to ask about crypto projects “Come in and talk to us,” adding that many may be concerned that “cooperating with the SEC could make their project the SEC’s next enforcement target.”

In calling on the SEC to go public for public comment to “establish the core digital asset regulation genesis block,” Verret advised the agency to address investor protection issues surrounding cryptocurrencies, among them blockchain-based tokens in decentralized projects may fall under current securities regulations, how federal securities laws may consider “unique aspects of token offerings,” and Commissioner Hester Peirce’s Three-Year Safe Harbor Proposal for some encrypted projects. Additionally, he raised the question of what requirements the SEC will consider when approving a Bitcoin spot ETF.

related: U.S. lawmakers propose safe haven for digital tokens in new bill

Although the agency has given the green light to a BTC futures-linked ETF, it has repeatedly Reject the company’s application ETFs seeking direct exposure to cryptocurrencies. ProShares Launched the first BTC futures linked ETF Listed on the New York Stock Exchange in October, a similar crypto investment product comes from Valkyrie coming later on Nasdaq.

“All five SEC commissioners have a unique opportunity to align this development with their own priorities through the design of the Exposure Draft,” Verret said. “This digital asset regulatory genesis block could initiate an interactive process that makes securities regulation more flexible, robust, and ultimately better protect investors.”