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Acting SEC Chair Mark Uyeda has hinted that the agency may explore a “sandbox” rule for tokenized securities, according to Fox Business reporter Eleanor Terrett. This could be a short term relief framework for digital assets that could allow both registered and unregistered crypto firms to innovate while the agency frames permanent solutions.
She clarified that a regulatory sandbox allows the market participants to test new ideas without fully following the current laws for a limited times. This lets them innovate without fear of lawsuits while regulators work on better rules.
“It’s what the prior administration could have done but instead they chose to sue companies for not being compliant,” she remarked.
Uyeda Calls for Unified Crypto Rules
Uyeda’s opening remarks suggested that crypto firms could benefit more from a unified federal framework instead of multiple state licensing rules. He proposed for temporary exemptions and asked for feedback while rules are developed.
“While the Commission works to develop a long-term solution to address these issues, a time-limited, conditional exemptive relief framework for registrants and non-registrants could allow for greater innovation with blockchain technology within the United States in the near term,” the agency stated.
The agency emphasized that it would support short term innovation in blockchain-based securities trading and is inviting market participants who are developing ways to trade securities using blockchain, to suggest where such exemptions could help.
It is waiting for the Congress to pass a crypto market-structure law which would then allow it to draft rules for the digital asset market. While lawmakers believe this could happen as soon as this year, it will still take more time after that for the SEC and other relevant agencies to write and enforce the actual regulations.
Uyeda pointed out that existing crypto platforms were capable of offering both tokenized securities and non-security tokens and the new platforms could offer 24/7 activity.
Experts Urge Tailored Crypto Rules
Experts noted that the current rules don’t fit crypto and called for new ones for problems specific to blockchains, decentralized trading, and existing crypto trading. Panelists also raised concerns about high-speed trading and lack of position disclosure in crypto and noted that the unregulated nature of multiple markets enables front-running and hidden activities.
At the SEC’s second crypto roundtable, Uyeda and SEC Commisioner Hester Pierce highlighted that many crypto platforms are interested in operating both SEC regulated activities and those that don’t fall under the agency’s scope, together. Incoming Chair Paul Atkins is expected to continue the agency’s evolving approach to digital assets.
Pierce stressed that SEC and the Congresss need to fill the gaps in crypto regulations as more firms mix securities and non-securities trading. The agency’s next roundtables will cover custody rules on April 25, tokenization and TradFi-DeFi crossover on May 12, and DeFi challenges in the U.S. on June 6.
The SEC recently issued new guidance for companies dealing with crypto assets that are deemed to be securities. It stressed the need for clear disclosures about the business, risks and financial details to better inform the investors.