SEC Specialist Peirce: Top 10 Things to Do in the Future of the Crypto Working Group

Author: SEC Specialist Hester M. Peirce; compiled by: Deng Tong, Bitchain Vision

When I was a kid, our family returned from Ohio to Maine every year.It was a different era.If something goes wrong with the car, you don’t have a cell phone to call for help.Paper maps and orientations are written on the sheet of paper, rather than the mobile app gives you step-by-step instructions.Forget booking a hotel online; you just need to look for the signs in the distance and stop to see if there are any available rooms.There are no podcasts or audiobooks, only a noisy radio struggles to find a local radio station.Instead of watching videos on the screen behind, my brothers and I scan the license plates of passing vehicles to “collect” the states in a technology-free road trip game.Road trips are very different today.In most ways, technology makes them a more interesting and less risky activity.

The crypto journey that the newly announced crypto working group [1] should also be more interesting and less risky than the crypto journey that the Commission has led the industry over the past decade.On its final journey, the commission refused to use the regulatory tools it mastered and kept slamming the law enforcement brakes as it staggered along a winding route with the destination unknown.But just as modern technology does not eliminate the risk of going on an open road, this new journey to regulatory clarity remains dangerous, and both the Commission and the public need to remain vigilant and be aware of the risks and opportunities that may exist.I am delighted to have a great team of talented SEC staff accompany me on the journey and we look forward to reaching out to many enthusiastic public members who will help us move forward on this journey.With all this help, I hope we can get to a better place than we thought on our previous cryptocurrency journey.Before I discuss the hopes and opportunities of the Working Group representatives, let me make some important disclaimers first.

First, despite my current responsibilities as a entrusted to lead the SEC’s new cryptocurrency working group, the views I express only represent my personal views as a committee member and do not represent the views of the SEC or my colleagues of the committee.Committee positions always require a committee vote.

Secondly, it took us a long time to get out of it, and it took some time to get out of it.For more than a decade, the committee has been involved in the crypto industry in various forms.The first Bitcoin exchange-traded product application appeared before us in 2013, and the same year the committee filed a fraud case related to the crypto element.[2] In 2017, we released the DAO Article 21(a) report, which reflects the first application of the Howie Test in this context.[3] Since then, many enforcement actions have been taken, many letters that do not take action, some exemptions to remedies, endless talks about encryption in speeches and statements, numerous meetings with crypto entrepreneurs, many inter-agency andThe International Cryptomatic Working Group, discusses certain aspects of encryption in the rule-making proposal, considers encryption-related issues in the review of registration statements and other documents, and approves many rule changes proposed by SROs to list crypto exchange-traded products.During this time, the Commission’s handling of cryptocurrencies has been marked by legal imperfection and commercial impracticality.Therefore, many cases are still in the litigation stage, many rules are still in the proposal stage, and many market participants are still in uncertainty.It will take time to determine how best to untangle all of these issues, including ongoing lawsuits.This will involve the work of the entire agency and cooperation with other regulatory agencies.Please wait.The Working Group wants to achieve good results, but we need to do this in an orderly, practical and legal way.

Third, the Working Group wants to go to a place where people can freely try and build interesting things that will not be a safe haven for fraudsters.One of the reasons why the U.S. capital market is so strong, efficient and effective is that we have rules designed to protect investors and market integrity and we enforce them.We do not tolerate liars, liars and scammers.While the Working Group works hard to help develop this regulatory framework, it will carefully consider anti-fraud protection measures.If the Commission finds that the fraud is beyond our jurisdiction, it may refer the matter to a sister regulator.If it does not fall under the jurisdiction of any regulatory body, the committee can inform Congress of the loophole.

Fourth, the Working Group is working to help create a regulatory framework that can achieve both the Commission’s important regulatory objectives (including protecting investors) and maintain the industry’s ability to provide products and services.The framework will be within the statutory authority of the Commission and we will work with other regulators operating within its statutory authority.Existing regulations do not allow products within our jurisdiction to compete freely.Congress has set parameters and the committee will apply them.Congress also gives us immunity and the Commission will use it where appropriate.If Congress directs the committee to impose requirements on market participants, the SEC rules won’t let you do whatever you want anytime, anywhere.Some of these rules will bring costs and other compliance burdens, which some may be annoyed by, and the commission will use its enforcement tools to pursue violations if necessary.

Fifth, committee staff are working to deal with applications for exemption relief, requests for non-action letters and registration statements, but the rise in volume may present challenges.Compliance with technical and legal requirements, reasonable legal analysis and comprehensive and timely responses to staff issues can help save committee resources and achieve clearer regulatory goals faster and smoother.As always, this diligence will help the application to pass the approval process more smoothly; on the contrary, a lack of such diligence may lead to unnecessary delays.The first one comes in does not mean the first one goes out.

Sixth, new commitments to a better regulatory environment should not be seen as recognition of any cryptocurrency or token.Regardless of whether these tokens or tokens are within our jurisdiction, the Commission will not endorse any product or service; there is no SEC approval seal or something like that.It’s easy to issue tokens, and if people want to buy tokens or products that lack a clear long-term value proposition, they should buy them freely, but they shouldn’t be surprised if the price drops one day.In this country, people are usually entitled to make decisions for themselves, but the same beautiful American expectation that people must make decisions for themselves, rather than counting on the government to tell them what to do or not to do so.Don’t expect the government to bail them out when they do something bad.

Now, after these rather rough disclaimers are presented, let us talk about the work that the Working Group is working with staff from various policy departments of the Commission.We will work with the federal government, state securities regulators, and international peers.We invite builders, enthusiasts and skeptics to join us in on what the final rule should be and what temporary measures may help promote innovation during this period.Committee staff have achieved a milestone – the revocation of Staff Accounting Notice 121 – but there is still much work to be done.[4] This list is not exhaustive and is not listed in order of priority or expected completion.

1. Safety status:The state of crypto assets under the Securities Act is the basis for solving many other problems.The working group is working to study different types of crypto assets.

2. Scope definition:The Working Group will work to help identify areas that are not within the jurisdiction of the Commission.As a first step, staff welcomes requests for non-action letters.Non-action letters are usually found in the form of staff statements, and staff will not recommend enforcement actions to the Committee for the specific circumstances set forth in the letter.The statement is situation-specific but provides a useful window for the general public to understand the staff’s ideas.

3. Tokens and token issuance:The Working Group is also considering the possibility of recommending the Committee to take action to provide temporary forward-looking and retroactive relief for token or token issuance, providing certain specific information to the issuing entity or other entities willing to assume responsibility, and keeping that information updated,and agree not to object to the jurisdiction of the Commission in the event of a fraud allegation in connection with the purchase and sale of assets.These tokens will be considered non-securities, so there is no uncertainty as long as the information remains up to date and accurate, whether they can be freely traded on secondary markets that are not registered with the SEC.This approach will bridge the gap until more permanent rules or legislation are finalized.It will provide an avenue for existing tokens to get out of the fog of uncertainty that is vaguely viable path forward and encourage more information disclosure.

4. Register and issue:The Working Group will consider working with staff and recommend that the Committee modify existing registration pathways, including Ordinance A and crowdfunding so that there is a viable path for those interested in registering for a token issuance.

5. Special Purpose Brokerage Dealer:The Working Group will explore possible updates to the statement of inaction against special purpose brokerage dealers, which is currently in its form unsuccessful.The initial change we may suggest is to expand the statement to brokerage dealers covering custodial crypto asset securities as well as non-security crypto assets.We will work with the public to identify other registration barriers.

6. custodial solutions for investment consultants:We will work with investment advisors to provide an appropriate regulatory framework within which the advisors can safely, legally and tangibly custodialize client assets on their own or with third parties.

7. Cryptocurrency lending and pledge:We need to clarify whether cryptocurrency lending and pledge plans are subject to securities laws., If so, how to constrain.We plan to work hard to help address how to make such programs in compliance with the law.

8. Cryptocurrency Exchange Trading Products:The Commission has received a rule change proposed by the SRO to list new types of cryptocurrency exchange-traded products.The Working Group will work with staff to provide clear statements on the methods used to approve or reject these applications.The Working Group will also assist staff and the Commission in considering requests to modify certain features of existing exchange-traded products, including allowing pledges and physical creation and redemption.However, before these changes can be implemented, the Commission may have to make progress on trusteeship and other issues.

9. Clearing agencies and transfer agents:The Working Group also plans to study the intersection of cryptocurrencies with clearing agencies and transfer agency rules.We will continue to work with market participants who are interested in tokenizing securities or otherwise using blockchain technology to modernize traditional financial markets.

10. Cross-border sandbox:Many cryptocurrency projects are international.The Working Group is considering how to facilitate cross-border trials on a limited scale and temporary timeframe, and it is possible to take a longer-lasting and longer-term approach.

This brief overview of how the Working Group sees the journey ahead is not exhaustive or clear, but I hope it will interest you.While we end up setting reasonable and clear rules, there are many obstacles, the journey will be exciting and rewarding if we work together.This is the beginning of the conversation – we don’t want to just have conversations with ourselves.

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[1] Press Release, “SEC Crypto 2.0: Acting Chairman Uyeda Announces the Establishment of a New Crypto Working Group”, January 21, 2025, https://www.sec.gov/newsroom/press-releases/2025-30.

[2] Press Release, “SEC accuses Texas man of running a Bitcoin-denominated Ponzi scheme”, July 23, 2013, https://www.sec.gov/newsroom/press-releases/2013-132.

[3] SEC, Investigation Report under Section 21(a) of the Securities Exchange Act of 1934: DAO, Exchange Act No. 81207 (July 25, 2017), https://www.sec.gov/files/litigation/investreport/34-81207.pdf.

[4] Employee Accounting Notice No. 122, https://www.sec.gov/rules-regulations/staff-guidance/staff-accounting-bulletins/staff-accounting-bulletin-122.