Work continues in the United States to create a crypto- and investor-friendly legal framework. Thankfully, I have friends in high places in the Web3 community.
It has been nearly three years since U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce announced her latest Token Safe Harbor Proposal 2.0.
Although this proposal is not progressing in its previous form, the Secretary is not giving up. “If the government wants to keep cryptographic innovation alive in the United States, I think it definitely needs version 3.0,” she said in an exclusive chat with TechCrunch at Georgetown University's McDonough School of Business.
“There is scope to address the legitimate concerns of crypto skeptics while also addressing the legitimate concerns of innovators,” Peirce added.
Peirce said an earlier version of the proposal aimed to “answer questions that many people had” regarding the issuance of tokens. She explained that she built an earlier iteration of this concept after the 2017 Initial Coin Offering (ICO) boom. At the time, many startups launched their own tokens, but “there wasn't a lot of disclosure about them.”
The safe harbor plan gives initial development teams a three-year grace period during which they can participate and build a decentralized network, subject to “registration provisions under federal securities laws, as long as certain conditions are met.” It was said that the purpose was to exempt the GitHub documentation.
Peirce's proposal was aimed at requiring people to make disclosures during the initial period of selling tokens. From there, the idea was, “What if blockchain becomes truly decentralized and no one has any more information?” [i.e., insider information] More than anyone else, disclosure will no longer be necessary because all the information will be out there and available to everyone. ”
The commissioner said he hasn't yet revealed the details of 3.0, but said he welcomes people to pitch their ideas in their own way. “We welcome ideas not just about safe harbors for tokens, but ideas more generally. If the SEC woke up tomorrow and said, 'We want to take a more productive approach,' what would the ideas be? Will it be?” [and] Where should I spend my time? ”
Peirce believes it's unreasonable to expect a new token project to have the same disclosures and legal understanding as a 15-year-old company going for an IPO. “There is a complete mismatch between what some people expect from these token projects and reality,” Peirce said. “As a result, we end up with the worst of both worlds: no disclosure and companies moving outside the United States.”
According to Maria Shen, general partner at Electric Capital, Crypto's developer ecosystem continues to expand globally, with 74% of developers located outside of North America. As a result, the percentage of developers actively working on blockchain in the U.S. fell from 40% in 2017 to 24% last year, a year-over-year increase of 5%, according to the company's 2023 Developer Report. Diminished.
“I think the message is getting across that it's really complicated to do business in the United States,” Peirce said. “So a lot of people are looking elsewhere or trying to do something different, and I think that's a problem.”
Without clear rules, it will be difficult for both startups and regulators to distinguish between what is good and bad “in theory,” she added.
“People spend a lot of time thinking about regulation, and that time could be spent thinking about what technology can actually do,” Peirce said.
He joked that it was “very optimistic” to think “a new day is dawning at the SEC” after the SEC approved 11 spot Bitcoin ETF issuers last month. But on the other hand, he added, “We need to be ready when that day comes.”
This story was inspired by an episode of TechCrunch's “Chain Reaction” podcast. Subscribe to Chain Reaction on Apple Podcasts, Spotify, or your favorite pod platform to hear more stories and tips from entrepreneurs who are building the most innovative companies today.
Connect with us:
- X, formerly known as Twitter, here.
- Email: chainreaction@techcrunch.com