SEC Plans Crypto Sandbox to Let Firms Innovate While Rules Are Finalized
Acting SEC Chair Mark Uyeda has suggested that the agency may consider implementing a “sandbox” rule for tokenized securities, as reported by Fox Business journalist Eleanor Terrett. This potential framework could provide a temporary relief for digital assets, allowing both registered and unregistered crypto firms to innovate while more permanent solutions are being developed.
Terrett explained that a regulatory sandbox would enable market participants to test new ideas without fully adhering to existing laws for a limited period. This approach would foster innovation without the fear of legal repercussions while regulators work on refining regulations.
Uyeda emphasized the importance of establishing a unified federal framework for crypto firms, rather than navigating through various state licensing rules. He proposed temporary exemptions and sought feedback from stakeholders as regulations are being formulated.
The SEC expressed its support for short-term innovation in blockchain-based securities trading and welcomed input from market participants who are exploring ways to trade securities using blockchain technology. The agency is awaiting the passage of a crypto market-structure law by Congress, which would enable it to develop rules for the digital asset market. However, the actual enforcement of these regulations will still require additional time.
Experts have highlighted the mismatch between current regulations and the unique challenges posed by blockchain technology, decentralized trading, and cryptocurrency exchanges. Concerns were raised regarding high-speed trading, lack of position disclosure, front-running, and hidden activities in unregulated markets.
During the SEC’s recent crypto roundtable, Uyeda and SEC Commissioner Hester Pierce discussed the interest of many crypto platforms in offering both SEC-regulated activities and those outside the agency’s jurisdiction. Incoming Chair Paul Atkins is expected to continue the agency’s evolving approach to digital assets.
Pierce emphasized the need for the SEC and Congress to address regulatory gaps as more firms engage in both securities and non-securities trading. The SEC’s upcoming roundtables will cover custody rules on April 25, tokenization and the intersection of traditional finance (TradFi) and decentralized finance (DeFi) on May 12, and challenges related to DeFi in the U.S. on June 6.
In a recent development, the SEC issued new guidance for companies involved in crypto assets classified as securities, stressing the importance of transparent disclosures about their business, risks, and financial aspects to provide investors with comprehensive information.
