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Instead of a safe harbour, SEC Commissioner Caroline Crenshaw proposed a “bridge” in which crypto firms collaborate with the SEC to develop compliance plans.
Caroline Crenshaw, a commissioner at the United States Securities and Exchange Commission, has stated that the “safe harbour” proposal would have exacerbated the problems seen during the 2017 and 2018 ICO boom.
Crenshaw made the remarks during the annual “SEC Speaks” event this month and posted her speech to the SEC website on Tuesday. The commissioner argues that the impact on investors and markets would have been far greater if safe harbor provisions were in place at the time:
“I think the results would have been even worse for investors and the markets. ICOs and other digital asset offerings raised billions from investors, but most never delivered on their promises. Investors suffered the losses.”
“And I think it is not a coincidence that these problematic offerings pre-dated and continued through the beginning of a multi-year downturn in the value of digital assets, sometimes known as the crypto-winter,” she added.
Hester Peirce, a crypto-friendly SEC commissioner, has advocated for the safe harbour proposal. The proposal, which seeks to give network developers a three-year grace period during which they can build a decentralised network without fear of SEC legal action, has yet to be adopted by the majority of the other commissioners.
Peirce, also known as “Crypto Mom,” presented a revised version earlier this year in March. On October 5, Cointelegraph reported that North Carolina House Representative Patrick McHenry proposed a three-year safe harbour in a draught bill of the “Clarity for Digital Tokens Act of 2021.”
Crenshaw argues that instead of pushing the crypto sector toward compliance, the safe harbor proposal would put investors’ capital at further risk, as crypto tokens would be deemed outside of the jurisdiction of the SEC for “several years.”
“I also worry that relaxing regulatory requirements in markets prone to investor protection failures, limited investor redress options because of pseudonymity and disintermediation, and market manipulation, cannot sustain investor confidence or yield lasting broad adoption,” she said.
Instead of a safe harbor, Crenshaw called for a “bridge” in which token issuers and other crypto firms work with the SEC to outline plans for regulatory compliance, or discuss specific exemptions when they are deemed “appropriate”:
“I believe that if market participants accept proactive responsibility for compliance, we can build a bridge that promotes innovation while preserving market integrity and providing the investor protections needed for these new markets to grow.”
“If you likely fall within our jurisdiction, work with us to describe your plan to comply or explain why some exemption is appropriate,” she added.
Crenshaw’s remarks echo those of SEC Chair Gary Gensler, who has repeatedly urged crypto firms to collaborate with the SEC and register with the regulatory body.