Crypto task force within the SEC will develop new rules for the industry

What’s new? The newly formed US Securities and Exchange Commission (SEC) crypto task force has begun creating clear rules for the industry. Commissioner Hester Peirce, who chaired the task force at the decision of acting SEC Chairman Mark Uyeda, announced a list of priorities, which included developing a way to classify crypto assets as either securities or commodities.

Press release

What else is known? The crypto group was created two weeks ago, one day after the resignation of SEC Chairman Gary Gensler, known for his approach to regulating crypto firms through lawsuits, fines, and enforcement actions. Lawmakers and industry representatives have repeatedly criticized this approach, noting that it has provoked an exodus of innovative startups overseas.

Peirce and Uyeda have also openly expressed their disapproval of Gensler’s strategy and pointed to a significant shift in the agency’s approach to regulating cryptocurrency under the new Donald Trump administration.

Gary Gensler will be replaced as chair of the SEC by crypto lawyer Mark Uyeda

Uyeda has been a consistent advocate of creating a clear regulatory framework for the crypto industry to foster its growth

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Just two days after the task force was created, the SEC rescinded accounting rule SAB 121, which Peirce called a “milestone” for cryptocurrencies in her memo. The rule required custodians to record clients’ crypto assets in their accounts as liabilities.

Peirce acknowledged the “legal imprecision and commercial impracticality” of the SEC’s regulation of cryptocurrencies under Gensler, adding that the task force will need time to decide what to do about lawsuits against crypto firms previously initiated by the regulator:

“Many cases remain in litigation, many rules remain in the proposal stage, and many market participants remain in limbo. Determining how best to disentangle all these strands, including ongoing litigation, will take time. It will involve work across the whole agency and cooperation with other regulators. Please be patient. The Task Force wants to get to a good place, but we need to do so in an orderly, practical, and legally defensible way.”

While the agency’s approach to regulating cryptocurrencies is changing, Peirce made it clear that the SEC’s primary goal of investor protection remains as important as ever. She emphasized that the task force will carefully consider fraud protections when developing rules.

In terms of priority areas of work, Peirce said she would investigate whether various crypto assets fall under the definition of a security, as well as identify areas that fall outside the SEC’s jurisdiction.

She also suggested that until clear crypto-regulatory rules are implemented, more lenient oversight of initial coin offerings (ICOs) should be introduced: assets would not be recognized as securities, but issuers would be required to supply up-to-date information.

In addition, the group intends to develop clear rules for the registration of exchange-traded crypto funds. Although the SEC approved spot funds based on Bitcoin and Ethereum last year, it rejected applications for funds based on other coins without justifying their fundamental difference from already approved products.

Finally, the SEC’s crypto group intends to promote the organization of international regulatory sandboxes to test technologies related to digital assets.