Hester M. Pierce, a Commissioner at the United States Securities and Exchange Commission (SEC), is stepping up her work for the crypto sector, with a new proposal that will provide digital asset developers with more freedom to work.
Known as “Crypto Mom” in the crypto space for her favorable stance on cryptocurrencies– especially with regards to effective regulations that will spur innovation. Pierce initially floated the idea of creating a safe harbor status for crypto projects back in August 2019. At a Convergence Forum held at the Singapore University of Social Sciences, the agency boss explained that she would like to build a non-exclusive safe harbor that will allow crypto token issuers to offer their assets under an “alternative regime” with its requirements.
Big Breaks for Crypto Developers
This week, however, she went one further and presented a proposal that will bring this vision to light. In a speech at the International Blockchain Congress in Chicago yesterday, Pierce outlined that her plan will grant a three-year grace period to decentralized network developers to work on their projects without fear of any intrusive action- at least from the SEC.
The draft of her plan, which was shared with several industry news media, outlined that within that period, developers won’t need to register (as is the norm, thanks to federal securities laws), as long as several predetermined conditions have been met. Compliant developers will be free to work as they please, going as far as signing participants in their projects before being put under the SEC’s regulatory proceedings.
Of course, one of the many requirements is that developers will still need to prove extensively that they are indeed working on an open-source network, while showing relevant disclosure concerning the project. Some of the data that will be disclosed include data on transactions, the project’s source code, as well as information on processes such as token generation and burning, transaction validation, and governance mechanisms.
It’s worth noting that this proposed safe harbor won’t be available to projects that have already been disqualified as bad actors according to the SEC’s laws. She also pointed out that the safe harbor will not affect the SEC’s anti-fraud authority regarding digital tokens.
“Although the safe harbor would preempt state securities laws, it would not stand in the way of state anti-fraud actions. If anyone lied in connection with selling tokens pursuant to the safe harbor, the SEC or a state could bring an enforcement action […] We all know that there are plenty of those kinds of “projects” polluting the crypto space,” she said.
Criticism Begins to Pour In
Pierce has long been an advocate of measured interference by the SEC into the crypto space, especially in an age where the agency brutally clamps down on almost every digital token that gets released without its consent.
However, the proposal from Pierce isn’t scoring fans throughout the space. Bruce Fenton, the chief executive of blockchain startup accelerator Chainstone Labs, revealed in a recent blog post that while it’s a commendable effort to boost innovation, there are some faults with it. Amongst other things, he argued that such provisions could easily be abused, and that not many people are particularly interested in the prospect of launching new blockchains.