As technology evolves, the US stock and values commission. UU. (Sec) must evolve with it. Nowhere is this more true than in cryptocurrencies, and now: the cryptoactive market has grown in size and sophistication in such a way that the recent and harmful approach of the SEC of enforcing and abdicating the regulation needs an urgent update.
While the long -term future of the cryptography industry in the US. , without sacrificing innovation or critical protections for investors.
#1 Provide guidance on ‘Air releases’
The SEC should provide interpretive guidance on how blockchain projects can distribute cryptographic rewards based on participants incentives, without being characterized as values offers.
Blockchain projects usually offer this type of rewards, often called “Airdrops”, to encourage the use of a particular network. These distributions are a fundamental tool to allow Blockchain projects to be decentralized progressively, since they disseminate the property and control of a project to its users.
If the SEC provided guidance on distributions, it would stop the tendency that these rewards are only issued to non -American people, a trend that in practice is democrating the property of blockchain technologies developed in the US American investors and companies. developers
To do:
Establish eligibility criteria for cryptoactive ones that can be excluded from being treated as investment contracts according to securities laws when distributed as air releases or incentive -based rewards. (For example, cryptoactive that are not values and whose market value is derived, or is expected to derive, substantially from the programmatic operation of any distributed major book or chain executable software).
#2 Modify crowdfunding rules
The SEC should review the crowdfunding regulation standards so that they are suitable for new cryptocurrency companies. These new companies often need a broader distribution of cryptoactive to develop critical mass and network effects for their platforms, applications or protocols.
To do:
Expand the supply limits so that the maximum amount that can be collected is along with the needs of cryptographic companies (for example, up to 75 million dollars or a percentage of the general network, depending on the depth of the disseminations) .
Exempt cryptocurrency offers similar to regulation D, allowing access to crowdfunding platforms beyond accredited investors.
Protect investors through limits to the amounts that any individual can invest (as the reg a+) does; solid dissemination requirements that cover the relevant material information for cryptocus (for example, related to the underlying block chain, its governance and consensus mechanisms); and other safeguards.
These changes would allow cryptographic projects in the initial stage to access a wide group of investors, democratizing access to opportunities and preserving transparency.
#3 Allow stockbrokers to operate in cryptocurrencies
The current regulatory environment prevents traditional stockbrokers from participating significantly in the cryptocurrency industry, mainly because it requires runners to obtain separate approvals to make transactions with cryptoactive ones, and impose even more onerous regulations on the stockbrokers who wish to guard cryptoactive .
These restrictions create unnecessary barriers to market participation and liquidity. Eliminating them would improve market functionality, access and protection of investors.
To do:
Enable the record so that stockbrokers can negotiate (and guard) cryptoactive, both values and non -values.
Establish supervision mechanisms to guarantee compliance with regulations against money laundering (AML) and your client knowledge (KYC).
Collaborate with industry authorities such as Finra to issue joint guidelines that address operational risks adapted to cryptoactive.
This approach would promote a safer and efficient market, allowing stockbrokers to contribute their experience in the best execution, compliance and custody to the broader cryptographic market.
#4 Provide guidance on custody and liquidation
The ambiguity about regulatory treatment and accounting rules has deterred traditional financial institutions to enter the cryptocurrency custody market. This means that many investors do not obtain the benefit of the management of fiduciary assets for their investments and, on the other hand, are invested on their own and organizing their own custody alternatives.
To do:
Clarify guidelines on how investment advisors can guard cryptoactive by virtue of the investment advisors law, guaranteeing adequate safeguards, such as wallets with multiple signatures and safe storage outside the chain. Also provide guidance on how to bet and vote on governance decisions for cryptoactive in the custody of investment advisors.
Develop specific guidance on cryptographic transactions liquidation, including schedules, validation processes and error resolution mechanisms.
Establish a flexible and technologically neutral framework that can adapt to innovations in custody solutions, complying with regulatory standards without imposing prescriptive technological mandates.
Rectify the accounting treatment repealing the accounting bulletin of the staff of the SEC 121 and its management of the balance liabilities for the custody cryptoactives. (Saber 121 transfers the cryptoded cryptodes to the custodian balance, a practice that disagrees with the traditional accounting treatment of guarded assets).
This clarity would provide greater institutional confidence, increasing market stability and competence between service providers, while improving protection for both retail and institutional cryptographic investors.
#5 Reform ETP standards
The SEC should adopt reform measures for bags in the stock market (ETP) that can promote financial innovation. The proposals promote broader access to the market for investors and fiduciaries accustomed to managing ETP wallets.
To do:
Return to the historical size of the market, demanding only that there is sufficient liquidity and pricing integrity for the regulated market of futures of raw materials to support an ETP product in cash. Currently, the dependence of the SEC of the “Winklevos” for surveillance agreements with regulated markets that satisfy the arbitrary discovery of predictive prices has delayed the approval of Bitcoin and other ETP based on cryptocurrencies. This approach overlooks the significant size and transparency of current cryptographic markets, their regulated futures markets, and creates an arbitrary distinction in the standards applicable to ETP quotation applications based on cryptocurrencies and all other bottling applications based In raw materials.
Allow cryptographic ETPs to be directly settled in the underlying asset. This will result in a better follow -up of the funds, reduce costs, will provide greater prices transparency and reduce dependence on more risky derivatives.
Demand solid custody standards for physically liquidated transactions to mitigate the risks of theft or loss. In addition, the option of betting on the inactive underlying assets of the ETP is expected.
#6 Implement certification for ATS listings
In a decentralized environment where the issuer of a cryptoactive may not play a significant continuous role, who has the responsibility of providing precise information about the asset? Here is a useful analogue of traditional values markets, in the form of rule 15c2-11 of the exchange law, which allows stock market runners to negotiate a value when current information about the value is available for investors.
By extending that principle to cryptoactive markets, the SEC could allow regulated cryptocurrency trade platforms (both bags and correotes) to negotiate any asset on which the platform can provide investors with accurate and current information. The result would be a greater liquidity for these assets in the markets regulated by the SEC, while guaranteeing that investors are equipped to make informed decisions.
To do:
Establish a simplified 15C2-11 certification process for cryptoactives listed on alternative trade systems (ATS) platforms, providing mandatory information on design, purpose, functionality and asset risks.
Demand exchanges or ATS operators to carry out due diligence on cryptoactive ones, including verification of the emitter’s identity, as well as important information about characteristics and functionalities.
Demand periodic disseminations to ensure that investors receive timely and precise information. In addition, clarifying when it is no longer necessary to inform by an issuer due to decentralization.
This framework would promote the transparency and integrity of the market and at the same time allow innovation to flourish.
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When taking the previous measures now, the SEC can begin to move away from its historic and very questioned focus on the efforts of application of the law and, instead, add a very necessary regulatory orientation. Providing practical solutions for investors, fiduciary and financial intermediaries will better balance investors protection with the promotion of capital formation and innovation, achieving the Mission of the SEC.
A longer version of this publication originally appeared in A16zCrypto.com.
