Opinion, Opinion Tuongvy Le, a former senior SEC lawyer, lays out an agenda for the world’s most necessary regulator to remain forward of the competitors. One strategy: adopting blockchain tech. 

The U.S. Securities and Exchange Commission has lengthy been the world’s most influential monetary regulator, serving to to make sure our capital markets are the deepest, fairest, and most accessible on this planet. But its continued relevance will rely on whether or not it may well do greater than merely reply to innovation — it should proactively foster it.

For almost a century, the SEC has tailored to evolving markets, new applied sciences and better retail participation. In its finest moments, the company has embraced innovation in service of transparency, investor safety, and capital formation. But in recent times, it has strayed from that legacy — nowhere extra visibly than in its strategy to crypto and blockchain.

The excellent news is, with a change in management and a extra open posture rising, the SEC has an opportunity to course-correct. But the larger query is: how will we make that change everlasting? How will we construct innovation into the SEC’s DNA in order that the subsequent promising monetary know-how isn’t strangled in its crib?

I spent almost six years on the SEC, first as a Senior Counsel within the Division of Enforcement after which as Chief Counsel within the Office of Legislative and Intergovernmental Affairs. I’ve since held senior authorized and coverage roles in crypto corporations throughout the ecosystem. From each views, one factor is evident: the SEC can fulfill its mission extra successfully — and preserve its international management — provided that it turns into a proactive accomplice in monetary innovation.

The SEC at Its Best

The SEC has a proud historical past of embracing change to the advantage of traders and markets alike. In the Nineteen Nineties, it digitized company filings by EDGAR, changing paper paperwork with searchable databases. It later permitted Regulation ATS, enabling the rise of other buying and selling methods that elevated competitors and liquidity. ETFs, which have been as soon as novel, are actually mainstream merchandise that supply low-cost, diversified publicity to a variety of property. More lately, fractional-share buying and selling has empowered thousands and thousands of retail traders to personal a slice of corporations they as soon as might solely admire from afar.

One particularly related instance because the SEC thinks about the way to regulate crypto is the company’s therapy of asset-backed securities. In the Eighties and Nineteen Nineties, the SEC acknowledged that these complicated monetary merchandise didn’t match neatly into present disclosure regimes. After years of examine and no-action letters, it developed a tailor-made disclosure framework in 2004 — refined additional in 2014 — that balanced innovation with investor safety. And it didn’t must carry a whole lot of enforcement actions to do it.

When the SEC Fell Behind

There are additionally instances the SEC didn’t adapt, to the detriment of each traders and markets. It was sluggish to reply to the rise of high-frequency buying and selling, contributing to the 2010 Flash Crash. It took years to implement the crowdfunding guidelines approved by the JOBS Act. It lagged on digital reporting requirements, delaying broader entry to market knowledge.

And, for a lot of the previous few years, its stance on crypto veered from warning to outright hostility. Instead of issuing clear guidelines for digital property, the company pursued a scattershot enforcement marketing campaign — usually in opposition to corporations that have been looking for to conform in good religion. Many of those actions didn’t even contain fraud or investor loss. Meanwhile, American crypto corporations fled abroad, and a worldwide business flourished with out us.

Even the SEC’s grudging approval of spot bitcoin ETFs in 2024 got here solely after it was pressured by a federal courtroom. And whereas the company at one level talked about making a crypto disclosure framework akin to what it did for ABS, it by no means adopted by.

Innovation Isn’t the Enemy

Crypto could also be new, however the SEC has confronted this problem earlier than. It is aware of the way to modernize its guidelines to fulfill new realities. What’s totally different now could be the chance to leverage innovation — not simply regulate it.

Take blockchain know-how. It might allow near-instant commerce settlement, decreasing threat and releasing up capital. It might enhance market transparency by immutable data and real-time transaction knowledge. It might decrease operational prices by decreasing intermediaries. And tokenization might broaden entry to personal markets and hard-to-reach asset courses, benefiting each issuers and traders.

Ironically, the SEC hasn’t critically explored how blockchain might enhance its personal market oversight. That’s a missed alternative. But it’s not too late.

A Blueprint for the Future

So what wouldn’t it seem like to construct innovation into the SEC’s core mission?

• Revise the SEC’s Mandate: Congress ought to amend the Securities Exchange Act of 1934 to explicitly embody the promotion of innovation and modernization, alongside investor safety, market integrity, and capital formation.
• Rethink Metrics of Success: The SEC shouldn’t measure success solely by the variety of enforcement actions or penalties collected. It must also look to capital formation, investor confidence, and the secure adoption of latest applied sciences.
• Create an Innovation Office: A devoted, empowered staff ought to have interaction with entrepreneurs, technologists, and teachers to information accountable innovation — simply as related places of work within the U.Okay. and Singapore have carried out.
• Adopt Risk-Based Regulation: Not each new product or platform wants full regulatory therapy on day one. Pilot packages, secure harbors, and regulatory sandboxes may also help innovators take a look at concepts whereas sustaining acceptable guardrails.
• Invest in Education and Training: SEC employees want higher fluency in rising applied sciences. Cross-disciplinary experience ought to be rewarded and cultivated.

These are usually not radical concepts — they’re confirmed instruments drawn from the SEC’s personal playbook.

In a worldwide race to outline the way forward for finance, the SEC has a selection: lead or fall behind. Its biggest energy has at all times been its credibility and skill to adapt.

The subsequent era of traders and entrepreneurs gained’t wait round for Twentieth-century guidelines to catch as much as Twenty first-century innovation. Nor ought to they need to. If the SEC desires to stay the gold commonplace, it should adapt as soon as once more — not simply to the current, however to what comes subsequent.

 CoinDesk: Bitcoin, Ethereum, Crypto News and Price Data Read More