The Digital Chamber (“TDC”), a blockchain trade group, has released its “SEC Digital Asset Policy Priorities,”[1] proposing “Day 1” measures for the U.S. Securities & Exchange Commission (“SEC”) under its new leadership – presumably Paul Atkins, President-elect Trump’s pick to replace Gary Gensler. TDC offers a glimpse into the possible plans of Mr. Atkins, who serves as a TDC advisory board member. TDC met with the staff of SEC Commissioners Hester Peirce and Mark Uyeda last week to present their proposals, and to further recommend that the SEC “reset its historically troubled relationship with the global digital asset industry and launch an era of transparency, cooperation, and well-reasoned regulation to bring much-needed clarity to digital asset market participants.”[2]
The proposals include:
Ending the SEC’s practice of regulation by enforcement, by de-prioritizing litigation – and ending all investigations related to digital assets – that do not involve “actual fraud, investor loss, or risk of imminent harm”
Coordinating with the Commodity Futures Trading Commission, Congress, and the White House to define when a digital asset implicates the securities laws, in an effort to more precisely analyze this question than through the courts’ current method of applying the test in SEC v. W.J. Howey Co., 328 U.S. 293 (1946)
Outlining a “reasonable path to registration” for digital-asset businesses
Withdrawing the SEC’s proposed “Safeguarding Rule,” which would, among other things, expand the definition of “assets” under the custody rule of the Investment Advisers Act of 1940, as amended, to broadly include “other positions held in a client’s account” rather than merely “funds and securities”
These proposals are hardly surprising in light of President-elect Trump’s professed support for the digital assets industry. But they offer reason for optimism in the digital assets industry that the SEC will take a more productive approach to regulation. Time will tell, however, how swiftly and effectively the SEC moves to realize these proposals – particularly in crafting a useful definition of a “security” in the digital-asset context, and facilitating the registration of digital-asset businesses.
Sadis & Goldberg advises on and litigates SEC compliance issues for digital asset companies. If you have any questions concerning registration, compliance, enforcement, or any related issue, please contact Douglas Hirsch (dhirsch@sadis.com), Sam Lieberman (slieberman@sadis.com), Ron Geffner (rgeffner@sadis.com), Yehuda Braunstein (ybraunstein@sadis.com), David Fitzgerald (dfitzgerald@sadis.com), or Frank Restagno (frestagno@sadis.com).
