Is the Securities and Exchange Commission Helping or Harming Cryptocurrency Entrepreneurs?
Hester M. Pierce. Commissioner to the U.S. Securities and Exchange Commission (“SEC”) gave a speech via video in Zug, Switzerland on November 7, 2018 on the impressions that the United States regulatory environment is giving to today’s cryptocurrency entrepreneurs.
At the beginning of her speech, she immediately contends that these are her personal opinions and not those of the SEC so we are interpreting her words as mere guidance to entrepreneurs as to what is going on in the minds of regulators when they are grappling with the SEC’s mission to protect the value of companies and facilitate capital formation.
Is the regulatory environment welcoming to today’s cryptocurrency entrepreneurs? Pierce is concerned that the answer right now is no, but she is hopeful for the future.
Peirce’s points are as follows:
In her speech, Pierce says, “regulators are coming to terms with crypto in different ways and do not always coordinate with one another so the United States is admittedly sending mixed messages.” She cites the fact that the Commodity Futures Trading Commission (“CFTC”) has allowed the development of crypto-derivatives markets, but the SEC so far has not approved any application to list an exchange-traded product. She concludes that there is unclear as to how these companies should proceed and if they can even develop organically without being subject to regulations. Interestingly enough, she critiques regulators for their lack of appreciation for the investor’s interest in gaining exposure to digital assets to balance out their investment portfolio and their fear of being blamed for investments that go wrong. Pierce herself, favors an approach that allows investors to make their own decisions by making sure that there is adequate information publicly available to make the investment and the SEC, she believes, should be doing their best to facilitate this process.
Pierce’s next point was that the SEC “needs to do a better job at explaining how and why [they] make decisions and what those decisions mean” to the investor. Stalling trading on the open market without explanation and not providing investors with information when stocks can be traded freely again is an example that Pierce uses in her speech. On the contrary, Pierce says that regulators at the CFTC and SEC are eager to understand the promise of new technology and are implementing new efforts to resolve these issues.
Last month, the SEC launched its Strategic Hub for Innovation and Financial Technology (“FinHub”), a forum dedicated to helping new and developing technology companies understand the regulatory framework. Additionally, Pierce totes the SEC’s many fraud convictions for companies running Ponzi schemes masquerading as cryptocurrency companies. She indicates that now companies who raise money legitimately and are seeking to build something with real value to bring to society can do so and individuals can invest in those companies.
If you would like to raise capital, then contact Wilson Bradshaw & Cao, LLP so you can raise money in a compliant manner. Wilson Bradshaw & Cao, LLP is a boutique securities law firm in Irvine, California and New York City. We help businesses solicit investors for both public and private companies in a compliant manner. We restrict our practice to securities law, focusing on private and public offerings and SEC enforcement work.